Promoting Private Sector Investment and Innovation To Address the Information and Communication Needs Of the Poor in Sub-Saharan

an Africa
Of the Poor in Sub-Saharan Africa
Promoting Private Sector
Investment and Innovation
To Address the Information and Communication Needs
Promoting Private Sector
Investment and Innovation
To Address the Information and Communication Needs
Of the Poor in Sub-Saharan Africa
Acknowledgement and Disclaimer

The report was jointly funded by infoDev and Alcatel, and prepared by consultants Peter Baldwin and Laurent Thomas. The report
was supervised by Kerry McNamara and Seth Ayers from infoDev and Souheil Marine from Alcatel Digital Bridge Initiative depart-
ment. The authors and the supervisors wish to acknowledge the efforts of the external and internal reviewers who read earlier drafts
of this report and suggested many insightful improvements. Special thanks to Catherine Camus, Editor of the Alcatel Telecommuni-
cations Review, who provided invaluable help during the final editing, translation, layout, and material production of this report.

The findings, interpretations, and conclusions expressed herein are entirely those of the author(s) and do not necessarily reflect the
views of Alcatel, infoDev, the Donors of infoDev , the International Bank for Reconstruction and Development / The World Bank and
its affiliated organizations, the Board of Executive Directors of the World Bank or the governments they represent. The World Bank
cannot guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown
on any map in this work do not imply on the part of the World Bank any judgment of the legal status of any territory or the endorse-
ment or acceptance of such boundaries. The material in this publication is copyrighted. Copying or transmitting portions of this work
may be a violation of applicable law. The World Bank encourages dissemination of its work and normally will promptly grant permis-
sion for use. For permission to copy or reprint any part of this work, please contact infodev@worldbank.org.

Copyright © 2005
The International Bank for Reconstruction and Development / The World Bank 1818 H Street, N.W.
Washington, D.C. 20433, U.S.A.
All rights reserved

Illustrations and layout by Atelier Antoine Maiffret (www.maiffret.net)

Printed in France by: MACON Imprimerie
22, rue du 134e Régiment d’Infanterie - 71000 Macon. France
Cover photos: © Alcatel and © Afrique Initiatives
TABLE of CONTENTS

Executive Summary 1

Introduction 4

Chapter 1: Case Studies 8

Chapter 2: Understanding Demand Patterns

For ICT In Developing Countries 21

Chapter 3: The Challenges of Serving Rural Areas 28

Chapter 4: Leveraging New Technologies and Existing Infrastructure

To Address ICT Needs of the Rural Poor 35

Chapter 5: Understanding the Value Chain 47

Chapter 6: Developing Sustainable Business Models

For Rural Network Operators 53

Chapter 7: Making It Happen: Enabling Environments

for ICT in Sub-Saharan Africa 64

Chapter 8: Going Forward 71

Appendix A: Glossary of Terms 73

Appendix B: Possible Impediments to Regulatory Effectiveness 75

Bibliography 76
Foreword

Today, more than two billion people, or nearly a third of the population worldwide,
subscribe to telecommunication services. However, despite the recent proliferation
of mobile services, several billion people, primarily in developing countries, con-
tinue to lack access to services that address their basic communication needs. In
addition, although the digital divide between developed and developing countries
is shrinking, the digital divide within many developing countries is continuing to
expand. This challenge is particularly acute for many Sub-Saharan African coun-
tries, which on average have rural populations that exceed 60% and, therefore,
require innovative solutions for delivering localized applications and services,
increasing infrastructure coverage, and realizing the market opportunities that exist.

infoDev and Alcatel have worked for many years to address this challenge, by help-
ing key stakeholders to develop an enabling environment that supports the use of
ICT as tools for poverty reduction and broad-based, sustainable development. Our
work has focused on both the demand and supply for ICT-enabled services. From
the demand side, we have independently and collectively supported innovative pilot
projects to demonstrate the potential for scaling up localized, ICT-enabled servic-
es, as well as addressing the policy and regulatory impediments to delivering these
services. On the supply side, Alcatel has developed new business models that lever-
age existing and new telecommunication infrastructure in innovative ways to pro-
vide value-added services, particularly in rural and underserved areas.

In order to be more effective, it is clear that we need to understand better the gap
between demand and supply, and to enable local actors to bridge this gap. Our joint
work on this study attempts to shed some light on these issues. We believe the poten-
tial for bridging this gap is on the horizon, and that it will require harnessing inno-
vative approaches to technologies, applications and services, developing sustain-
able business models, and implementing policy and regulatory frameworks that
enable the delivery of ICT-enabled services to underserved areas. The private sec-
tor will play a big role in bridging this gap, but it will also require innovative pub-
lic and private partnership initiatives.

As a joint contribution to the second phase of the World Summit on Information

Society, this study aims to highlight opportunities for achieving core development
objectives, by bridging the gap between demand and supply to meet the informa-
tion and communication needs of rural and underserved communities in Sub-Saha-
ran Africa.

Mostafa Terrab Thierry Albrand

InfoDev Program Manager Alcatel, Vice President Digital Bridge
Executive Summary
T
he idea behind this collabora-
tion was for infoDev to assess
the demand for information
and communication services,
with Alcatel addressing operator supply-
side constraints, to produce a detailed
picture of the market for information and
communication services in Sub-Saharan
Africa (SSA). infoDev drew on its sub-
stantial library of information and com-
munication technology (ICT) projects in
SSA. Many provided interesting insight
into the market for ICT services, but the
list of projects inviting further study
became smaller when using the follow-
ing criteria:
1. The service offered should represent the
fruits of market research conducted by the
private sector within the countries them-
selves;
2. The service should address unmet needs
identified by the Millennium Development
Goals;
3. Where possible, the projects should be self-
sustaining.
Our analysis led to the selection of five
businesses, most of which met all three
criteria. The five studied businesses
focus on healthcare, mobile banking, and
market price information services.
After extensive desk and field research,
as well as consultation with telecoms
operators working in Sub-Saharan
Africa, several common threads emerged
in the course of this study:
• Demand for information and communica-
tion services is strong in SSA. Local serv-
ice providers have identified demand for
services in the fields of healthcare, banking,
property management, and market pricing.
The services provided are frequently offered
through different channels than in the
developed world. Organizations such as
Pésinet in Senegal illustrate the specific
demand patterns of SSA by designing cus-
tomized ICT-based services to address
infant mortality rates in SSA, which are
among the highest in the world.
• Since information is a normal good,
demand for information would increase
with decreased bandwidth costs, which in
Africa are among the highest in the world.
Opportunities for lowering bandwidth costs
include increased competition among oper-
ators, universal access requirements, and
the establishment of national or regional
Internet exchange points (IXPs). Sufficient
backbone infrastructure is also a necessary
pre-condition for developing ICT services on
a wider basis;
• Although voice telephony may be the dom-
inant technology, especially in countries
with low literacy rates, there is significant
demand for data services. The key is to
develop affordable value-added services,
and applications with local content. Each of
the value-added service providers in Chap-
ter 1 illustrates that there is demand for
data services;
• Major regulatory, market, and infrastructure
impediments exist, which governments
must address if ICTs are to become more
pervasive throughout SSA. Among these
impediments are a lack of a constructive
policy framework regarding universal
access and market competition; inade-
quate access to investment capital; and
weak human capital in the form of educa-
tion and training in the use of ICTs. In
absolute terms, Project IKON in Mali spends
per kilobyte around eight times what it
would spend in a developed country. Ade-
quate business loans are difficult to obtain
for Manobi in Senegal due to a lack of phys-
ical assets that it can offer as collateral. Both
companies also face import duties on
equipment of 50-100 percent;
• Operators and service providers can make
profits in rural areas and low-ARPU mar-
kets by reducing total cost of ownership
with optimized CAPEX and OPEX. This can
Promoting Private Sector Investment and Innovation 1

be achieved with cost-efficient solutions
designed for rural/remote configurations.
Innovative business models also allow
operators to access financial innovation and
to better address demand through adapt-
ed distribution channels and marketing
strategies, as well as designed applications,
as specified above;
• Low-income users need customized solu-
tions that meet their constraints and needs
in terms of access to credit (micro-financ-
ing), top-up and payment solutions (e-
refill), localized user interfaces, and price.
Critical success factors
In addition to the common threads enu-
merated above, several factors critical to
the successful rollout of information
and communication services became
apparent. Among them were:
Market competition in ICT sectors
A recent World Bank Group report shows
the importance of market competition in
spurring investment in ICT infrastruc-
ture. 1 This study compared the
approaches of Mauritania and Ethiopia.
Between 1995 and 2003, Mauritania
auctioned two mobile licenses, privatized
the incumbent telecom provider, and
established an effective, transparent
regulatory agency. Ethiopia did none of
these. During this period, telecommuni-
cation penetration rates in Mauritania
Lack of competition leads to high prices for international calls
in Sub-Saharan Africa
6 50%
Cost of 3.Min Call to US (US$)
45%
5
38%
4
29%
3 25%
2 17%
13%
1 for rural ICT services
0 0%
Sub-Saharan East Asia South Latin American Europe &
Africa & Pacific Asia & Caribbean* Central Asia
Cost of 3 Min Call to US (US$)(2000)
% countries with full competition
* LAC data are for 1999.
There are no countries in the MENA region with full competition.
Sources: (a) Competition in International Voice Communications, World Bank, 2003,
based on World Development Indicators, citing ITU data.
2 Promoting Private Sector Investment and Innovation
Executive Summary
went from 0.41 percent to 11.07 percent,
while Ethiopia’s penetration rates went
from 0.25 percent to 0.61 percent, even
as the mobile penetration rate for SSA
overall (excluding South Africa) increased
from 0.26 percent to 3.34 percent.
Greater access to capital
Project IKON and Manobi both cited the
difficulty of access to credit from lending
institutions within their respective coun-
tries. A lack of tangible assets com-
bined with high collateralization require-
ments (up to 80 percent of the loan
amount) and fees, long delays in distri-
bution of funds, and import duties on ICT
hardware of up to 50 percent, hinder
startups’ ability to capitalize projects.
An educated labor pool
IKON and Manobi also mentioned a lack
of a qualified labor pool knowledgeable in
ICT applications. Often, job applicants
lack even the most rudimentary knowledge
of computer use. For SSA countries to join
the global economy, universities must
equip students with the necessary skills.
Educational reform at all levels is a
precondition for the successful rollout of
information and communication infra-
structure and services. Four of the five
projects studied in this report are the
result of a doctoral thesis by the compa-
ny founder. One wonders how many
other value-added services remain undis-
covered in SSA due to the lack of ade-
quate education.
Localization of content
45% Low literacy rates remain a significant
40% impediment to the rapid uptake of ICTs.
35%
In addition, there exists little content in
30%
local languages. IKON illustrates the
benefit of localized software in its use of
a Bambara-based Linux distribution.
20%
15%
An enabling policy, legal, and regulatory framework
10%
5%
SSA countries will have to address issues
such as universal access, data privacy, dis-
pute resolution, and interconnection fees
in order to facilitate the rollout of infor-
mation and communication services.
These countries must also address voice
over Internet protocol (VoIP) telephony.
Executive Summary
Public-private partnerships
Public-private partnerships may present
opportunities for ICT infrastructure roll-
out, but they may also produce negative
externalities.2 The design of the financ-
ing scheme is critical. Reverse auctions
of spectrum licenses and other “smart
subsidies” have shown some promise in
countries such as Chile. For example,
public-private partnerships may be par-
ticularly useful for building capacity
through education programs and busi-
ness incubation centers.
What is covered in this study
This paper makes some broad policy rec-
ommendations, but does not attempt to
address the policy or regulatory frame-
work among all 48 SSA countries. That
task is left to other publications. Read-
ers looking for a more in-depth discus-
sion of policy and regulatory recommen-
dations are advised to read, among
other publications, “Connecting Sub-
Saharan Africa: A World Bank Group
Strategy for Information and Communi-
cation Technology Sector Development.”
Lessons learned
Value-added service (VAS) providers are
today using ICT infrastructure to deliver
innovative services to end-users. The five
projects described have identified demand
for services, and despite difficult infrastruc-
tural, human-capacity, and financial con-
straints, they are mostly revenue-positive.
Greater access to financial and network
resources would enable VAS providers to
scale up their enterprises, in turn increas-
ing traffic for network operators.
Following workshops with telecommuni-
cations providers pursuant to this study,
the authors are convinced that the solu-
tion to the challenge of scaling up exist-
ing or similar service providers is to
enable the rural poor to identify more
fully their information and communica-
tion needs. Provision of these needs
should drive technology choices and
business considerations, and not the
other way around. A well-regulated
market for ICT being necessary for the
security of a free market, the ability of
individuals or companies to provide
value-added services should not be
impeded. These case studies serve to
demonstrate that service providers are
using the ICT infrastructure in ways that
operators did not anticipate, and that,
consequently, demand for ICT infra-
structure is at present greater than
telecommunications operators think,
sufficient to roll out infrastructure to
rural areas in Africa3.
1
Connecting Sub-Saharan Africa: A World Bank Group
Strategy for Information and Communication Technol-
ogy Sector Development
2
”The Application of Information and Communication
Technologies in the Least Countries for Sustained Eco-
nomic Growth,” 2004 Edition, International Telecom-
munication Union. See also Engvall, Anders and Olof
Hesselmark “Profitable Universal Access Providers”
(Report for Sida), Stockholm, Oct. 2004., p. 5, and
also “Establishing Community Learning and Informa-
tion Centers in Underserved Malian Communities:
Report of Assessment Mission March 2005, Microsoft
Unlimited Potential Grant.
3
For further discussion on successful practices, case
studies and access technologies for rural and remote
areas, see http://www.itu.int/ITU-D/fg7/
Promoting Private Sector Investment and Innovation 3
 Introduction

I
n the face of the ambitious objectives
established by the Millennium
Development Goals (MDGs)1, some
question the value of investing in
information and communication tech-
nologies (ICTs). Critics feel that scarce
resources would better be allocated to
fighting the root causes of extreme
poverty and hunger, child mortality, the
spread of HIV/AIDS and other diseases,
and the other MDGs.∗
* The Millennium Develop- Yet ICTs complement, rather than replace,
ment Goals arose, in 2000 as
a result of the Millennium
investment in traditional development
Declaration of the interna- efforts.2 ICTs can advance traditional
tional community and mem-
ber states of the UN, and will
development goals in health and educa-
achieve byin 2015, as a result tion by empowering traditionally disen-
of the Millennium Declaration
of the international communi-
franchised citizens, including the rural
ty and member states of the poor, by allowing them to identify prob-
UN:
1.Eradication of extreme
lems that interest them, and by providing
poverty and hunger; information on a variety of matters, from
2.Achievement of universal
primary education;
life-saving tips such as HIV/AIDS-related
3.Promotion of gender equal- information to market or business infor-
ity and empowerment of
women;
mation. In their proper context, ICTs can
4.Reduction of child mortali- be tools to alleviate problems facing the
ty;
5.Improvement in maternal
rural poor. Another aim of this study is to
health; show that demand for ICT-enabled serv-
6.Combating HIV/AIDS,
malaria and other diseases;
ices in unserved areas can increase traf-
7.Ensuring environmental fic for telecom operators.
sustainability;
8.Developing a global part-
There is a certain inevitability to the
nership for development. globalization of information and commu-
nication technologies. Despite much talk
about the so-called “digital divide,” there
is strong evidence that this divide between
developed and developing countries is
actually narrowing.3 Unsurprisingly, much
of the current literature indicates that ICTs
are a positive economic good in the sense
that demand for ICT increases as income
increases.4 The graph below illustrates this
fact.
Of greater concern are intra-country digi-
tal divides, which may be widening as
“early adopters,” the wealthy, and the
diaspora adopt ICTs. This alone is sufficient
reason to wish to promote the diffusion of
ICTs in developing countries, so that the
rural poor can have similar access to
opportunities, and intra-country digital
divides can decrease. Also, since urban
areas offer a larger potential customer base
as well as lower infrastructure costs, tele-
com operators naturally focus on these
regions first. Yet rural inhabitants face high-
er opportunity costs, since they have fewer,
more widely dispersed alternative commu-
nication channels. Simply put, lack of
physical infrastructure such as roads makes
the cost of inaction with regard to ICT infra-
structure even higher in rural areas than in
urban regions of developing countries.

GDP & Mobile Penetration

14
GDP per Capita US$ x 1000 (2004 est.)

12
Mauritius
South Africa
10
Botswana
8
Seychelles
Namibia Tunisia
6
Gabon
4 Egypt Morocco
Maldives
Equatorial Guinea
2
Senegal Mauritania
Congo Brazza
0 DRC Mali
0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00%
Source: CIA Fact Book for GDP in PPP, and Alcatel estimates for mobile penetration rates

4 Promoting Private Sector Investment and Innovation

Introduction
Generally able to respond more quickly
to rapidly changing demand and circum-
stances, private sector investment is
crucial to mainstreaming ICT in develop-
ing countries. This does not ignore the
importance of public investment. How-
ever, the scope and scale of investment
required, and severe budget strains
faced by developing country govern-
ments, mean that public investment in
ICT is most effective when it substantial-
ly leverages private investment, and
when it is targeted on those areas where
private investment is inadequate, due to
high entry costs or the business risks
associated with the delivery of services
in rural areas. There has been much
small-scale private sector ICT innovation
in many developing countries, and some
developing countries are already making
substantial progress in building an ICT
sector, or in leveraging ICT to make their
private sector more competitive and
their public sector more responsive.
Yet, in most developing countries, the
challenge of scaling up private sector
innovation and investment in ICT
remains substantial.
A key challenge countries face is in
developing new business and service
models that directly answer the needs of
developing-country customers. Much of
the discussion in recent years regarding
increasing ICT access and services in
developing countries focused on the
supply side of the market for network
infrastructure in unserved markets.
However, an emerging consensus indi-
cates that the key to successful, private
sector-led ICT innovation in developing
countries lies in understanding the
demand side of the equation. Our study
examined the demand side of the provi-
sion of ICTs in developing countries, and
discussed the unique needs of customers
there. The result is this paper, co-pro-
duced by the Information for Develop-
ment Program (infoDev), a multi-donor
agency within the World Bank, and
Alcatel, the telecom equipment and IT
solutions provider.
Why focus on sub-Saharan Africa?
The explosive uptake of information
and communication technologies such as
mobile telephony indicates that these are
Facts and Figures for Sub-Saharan Africa (Excluding South Africa)
INDICATORS YEAR RESULTS
Population 2003 647 M
GDP per capita (USD) 2002 342
Urban pop (%) 2003 36
Iliteracy (% of population age 15+) 2003 35
Gross promary enrollment (% of school age population) 2003 87
Main telephone lines (%) 2003 0,96
Residential main lines (% households) 2002 3,5
Mobile cellular subscribers (%) 2003 2,78
- % Prepaid (mobile) 2003 91,2
- % Population coverage (mobile) 2003 47,6
Effective teledensity fixed+mobile (%) 2003 2,68
Personal computers (%) 2003 0,75
Internet users (%) 2003 0,7
Television sets (per 1000 people) 2001 60
Radios (per 1000 people) 2001 198
Source : ITU African Telecommunication indicators 2004
World Bank Development indicators
transforming technologies, whose
impacts are still not fully known. The
same market forces that have trans-
formed every human activity with new
technologies are already making them-
selves felt in the “BRIC” countries: Brazil,
Russia, India, and China. As a result, it
is widely agreed that the “next billion”
mobile subscribers in the next decade
will come from these countries. During
this time, no more than 20 million new
mobile subscribers will come from sub-
Saharan Africa (excluding South Africa).
This observation begs the question of
why this project focused on SSA. The
answer is that, for the most part, some
combination of demand, supply, and
enabling environment exists in the BRIC
countries, such that these countries are
on track to roll out infrastructure. Also,
although it is starting from a lower pen-
etration level, SSA is one of the fastest- * Sub-Saharan Africa con-
sists of 48 countries: Angola,
growing regions in terms of mobile Benin, Botswana, Burkina
telephony. Finally, if ICTs are a tool for Faso, Burundi, Cameroon,
Cape Verde, Central Africa
fighting extreme poverty and achieving Republic, Chad, Comoros,
the other Millennium Development Goals, Congo, The Democratic
Republic of Congo, Cote
SSA is one of the most challenging d'Ivoire, Equatorial Guinea,
places to start. Eritrea, Ethiopia, Gabon, The
Gambia, Ghana, Guinea,
Guinea-Bissau, Kenya,
In Chapter 1: Case Studies, we look at Lesotho, Liberia, Madagas-
car, Malawi, Mali, Mauritania,
five examples of innovative uses of ICT in Mauritius, Mayotte, Mozam-
SSA∗, and attempt to draw inferences bique, Namibia, Niger, Nige-
ria, Rwanda, Sao Tome and
from these examples about the level of Principe, Senegal, Seychelles,
ICT demand in the region. Since local Sierra Leone, Somalia, South
Africa, Sudan, Swaziland,
service providers better understand the Tanzania, Togo, Uganda,
needs of their local markets5, our method- Zambia, and Zimbabwe.
Promoting Private Sector Investment and Innovation 5

ology was to examine how these service
providers had assessed the needs of
their potential customers, and discover
what impediments they faced in bringing
their services to market. From analysis of
the situation on the ground as perceived
by these service providers, Chapter 2:
Understanding Demand Patterns for
ICT in Developing Countries attempts to
draw inferences regarding key success
factors as these companies, or others like
them, attempt to grow.
After examining demand , this paper dis-
cusses in Chapter 3: The Challenges of
Serving Rural Areas, the challenges
operators face in supplying the infra-
structure necessary to enable service
providers to grow, before moving on to
a discussion of the supply side of the
market for information and communica-
tion services. Chapter 4: Leveraging
New Technologies and Existing Infra-
structure to Address ICT Needs of the
Rural Poor reviews existing access tech-
nologies that allow service providers to
deliver profitable value-added services
and applications to rural and remote
areas. Chapter 5: Understanding the
Value Chain describes the various play-
ers along the value chain for information
and communication services in SSA,
touching briefly on other factors such as
regulation that affect producers’ ability
to create value along the chain. Where
enabling regulatory and financial envi-
ronments are found to be insufficient to
create markets, we recommend regula-
tory reform, along with some form of
public-private partnership. Chapter 6:
6 Promoting Private Sector Investment and Innovation
Introduction
Developing Sustainable Business Mod-
els for Rural Network Operators pro-
vides an analysis of sustainable business
models to show that telecom operators
can create value for themselves and for
their customers in rural areas. Chapter
7: Making It Happen provides broad
guidelines for the policy and financial
environments necessary to spur rollout
of infrastructure. Finally, Chapter 8:
Going Forward summarizes lessons
learned from the projects studied in the
report and gives guidelines to move for-
ward.
1 See, for example, “Advance Social Watch
Report 2005: Unkept Promises”
http://www.mdgender.net/upload/mono-
graphs/SW-ENG-Advance-2005.pdf
2 See, for example McNamara, Kerry: Infor-
mation And Communication Technologies,
Poverty And Development - Learning From
Experience
3 see, for example, “Africa: The Impact of
Mobile Phones” (
http://www.vodafone.com/arti-
cle/0,3029,CATEGORY_ID%253D30402%25
26LANGUAGE_ID%253D0%2526CONTENT_ID
%253D255218,00.html
(http://www.vodafone.com/arti-
cle/0,3029,CATEGORY_ID%253D30402%25
26LANGUAGE_ID%253D0%2526CONTENT_ID
%253D255218,00.html
4
Ibid.
5
As an example, when it was first rolled
out, mobile telephony was expected to
serve rich customers;, when in fact it has
taken hold in developing countries.
Introduction

Connectivity in Africa

Bits per capita Outgoing

connections
EUROPE ME-WE 2/3(2x
SEA- 20
Gb
p s) North America
0.25 1 5
LFON
(5x 2 . 5 G bps) Europe
MOROCCO TUNISIA
Intra-Africa

ALGERIA Asia
LIBYA
EGYPT
WESTERN
SAHARA 1036
CAP 373
VERDE 13
2 Total Mbit/s
MAURITANIA MALI NIGER 0 200 400 600 800 1000 1200

ERITREA
SENEGAL CHAD
GAMBIA
GUINEA BISSAU BURKINA
DJIBOUTI
GUINEA SUDAN
BENIN
TOGO SOMALIA
NIGERIA
Atl

SIERRA LEONE IVORY

COAST GHANA
ant

CENTRAL ETHIOPIA
AFRICAN REPUBLIC
is-2

LIBERIA CAMEROON
(2x
200

Indian Ocean
2 .5

UGANDA
0

EQUATORIAL GUINEA
KENYA
Gbp

ASIA
CONGO
s)

SAO TOME GABON RWANDA

& PRINCIPE ZAIRE
BURUNDI
SAT-3 West Africa Ca

Cabinda TANZANIA
(ANGOLA) SEYCHELLES
SOUTH
SA
T-2

AMERICA
(2

South Atlantic
x5

COMORO IS.
00
19

MALAWI
M
93

ble (WA
bp
s)

ANGOLA ZAMBIA
C)( 2 x S

MOZAMBIQUE
2.5 G

ZIMBABWE
NAMIBIA
2 0 G b p s)
b p s)

BOTSWANA MADAGASCAR
1000 km
SOUTH AFRICA
x 2.5
01

1000 mi. (Walvis Bay)

(4
M1

GDP per capita SWAZILAND

TD

USD 0-300 LESOTHO )

ps
2 Gb
200
USD 300-1000 SOUTH AFRICA
2 .5
USD 1000-2000 ) (2x
S AFE
USD 2000-4000
a st (
ar E
USD 4000-10000
c a&F Public VSAT licences
n Afri
Souther
Source: IDRC SAT-3/WASC/

Promoting Private Sector Investment and Innovation 7

 Chapter 1: Case Studies
T
here are ample data on the
rapid uptake of ICTs in general
and mobile phones in particular,
which would indicate strong
demand for ICT network infrastructure.
Yet, skeptics question the worth of data on
mobile phone penetration in sub-Saharan
Africa. Specifically, critics ask: Can some-
one who owns a SIM card but not a phone
be considered a network user? Should we
count a phone owner who has no pre-paid
credits and can therefore only receive
calls? For these reasons, “teledensity,” or
penetration, simply measures the number
of telephones per capita, not the level of
access to telephones.
The scarcity of reliable quantitative data
has led to a call for a qualitative rather
than quantitative examination of how
people use telephones, or the telephones
they have access to.1 The following five
case studies attempt to do just that. They
are not meant to be exhaustive analyses
from a business standpoint. Rather, they
seek to show that demand for basic infor-
mation and communication services
exists, and is growing; that existing
infrastructure and ICT technologies are
being used to deliver basic services (e.g.
financial and healthcare) in innovative
ways that differ from how they are used
in developed countries; and that these
innovative service delivery models and
subsequent usage patterns may require
new indicators to capture demand.
Companies studied
infoDev and Alcatel looked at five com-
panies in depth: REOnet in Mali, specif-
ically Project IKON, a teleradiology proj-
ect; SIMpill in South Africa, which
addresses real-time compliance manage-
ment for long-term drug therapies;
Pésinet in Senegal, a first line of defense
against the leading causes of morbidity
and mortality among 0-5-year-old chil-
dren in SSA; Manobi, also in Senegal, a
8 Promoting Private Sector Investment and Innovation
company that delivers market price
information to farmers and fishermen in
addition to geolocation and GPS mapping
services; and MoPay, a mobile banking
company based in South Africa.
I. Project IKON
In Mali, a country with a surface area of
1,240,000 km2, a population of 11.6 mil-
lion, and just three national and six
regional hospitals, three medical stu-
dents at the University of Bamako iden-
tified a need for expanding access to
medical services for the rural poor. The
three also had an interest in open-
source software, and created project
IKON, to provide radiological diagnostic
services to individuals in Sikasso, Mopti,
and Timbuktu. Patients are x-rayed in
these towns, and a radiology technician
transmits the images to a hospital in
Bamako for diagnosis.
Project IKON grew from a workshop con-
ducted by REOnet and the Internation-
al Institute for Communication and
Development (IICD), a Dutch NGO, in
May 2003. The medical students identi-
fied the inadequate coverage of radiolog-
ical services as a particularly pressing
need. At the time, there were 11 radiol-
ogy specialists in the country, ten of
whom lived in the capital, Bamako.
Accordingly, REOnet designed a pilot
project, Project IKON, with these specif-
ic goals:
• Greater patient care;
• A decrease in misdiagnoses;
• A decrease in the number of unnecessary
trips to Bamako from regional towns and
villages;
• A decrease in healthcare costs borne by the
rural poor.
Project design
IKON chose three satellite hospitals in
Sikasso, Mopti, and Timbuktu that lacked
Case Studies

Net Cash Flows, Pilot Phase

radiological specialists to connect to the
main hospital at Point G in Bamako. IKON
300
provided each hospital with an x-ray

FCFA (x 1000)
scanner to digitize images, and other 250
equipment such as a PC, backup power
supply, and, if necessary, a fixed-line 200
phone. At Point G, IKON installed a serv-
er to receive the images, a printer to print 150

the digital x-rays, and other equipment.

100
IICD provided seed capital of approxi-
mately 69,000,000 FCFA, or roughly
50
US$ 140,000, to purchase the necessary
equipment at the Point G hospital and 0
three satellite hospitals, and to train 1 2 3 4 5 6 7 8 9 10 11 12
Month
individuals in the use of the technology. Source: Project IKON

Methodology
To use IKON’s teleradiological services,
the patient attends the regional hospital.
If a General Practitioner determines
that an x-ray is needed, he performs the
service. The image is digitized using a
special x-ray scanner, and sent via a dial-
up connection to the Bamako server.
These files, averaging 150 to 350 Kb in
size, transmit quickly, even over dial-up.
The specialist in Bamako receives the file
and makes his diagnosis. The radiology
specialist then emails the GP at the
regional hospital. Except in situations
where a diagnosis is urgently needed, x-
rays are transmitted once daily, implying
a 24-hour turn-around time for diag-
noses. (Even for radiological exams in
situ, 24 hours is standard turn-around
time in Mali.). In emergencies, IKON can
produce a diagnosis in one hour
For this service, IKON charges 2500
the second month of the pilot phase.
IKON has already identified additional
services beyond thoracic radiological
diagnosis that it could provide using its
existing infrastructure. Among these
are dermatological, trauma, and other
pathological diagnoses, for which IKON
has purchased digital cameras. IKON
also envisions monthly distance-learning
* Revenues to the regional
seminars for medical personnel using its hospital and to Project IKON
existing infrastructure. are approximate because the
amount each receives
depends on whether the hos-
Prospects for Growth pital is a private facility or a
state-owned facility. For pub-
IKON faces strong growth prospects as lic hospitals, the amount
it moves from pilot phase to full imple- received is 625 FCFA per
image, with Project IKON
mentation. With an additional invest- receiving 375 FCFA. When
ment of approximately US$ 64,000, the image was is taken at a
private hospital, Project IKON
IKON can roll out services to four addi- receives 1,000 FCFA. . In the
tional regional hospitals, effectively pro- case of public hospitals, Pro-
ject IKON helps pay the over-
viding teleradiology services to every head costs associated with
hospital in the country. providing its service.

FCFA (roughly five dollars) per image.

The 2500 FCFA is split among the
regional hospital, the hospital at Point G, Net Cash Flows, Extension Phase
the diagnosing physician, and IKON;
300
roughly 600 FCFA goes to the regional
FCFA (x 1000)

hospital to cover their overhead, 375

250
FCFA goes to the hospital at Point G,
1125 FCFA goes to the diagnostician, and 200
approximately 400 FCFA goes to IKON.∗
The entire process uses open-source 150
software tailored to the application by
IKON. The software encrypts the image 100

for transmission, along with confidential

50
patient data, and handles billing. IKON
conducted a one-year pilot project to test
0
the idea, and found sufficient demand for 1 2 3 4 5 6 7 8 9 10 11 12
teleradiology services to generate a prof- Month
Source: Project IKON
it. IKON has been revenue-positive from

Promoting Private Sector Investment and Innovation 9


# The United Kingdom is a
party to the Information Tech-
nology Agreement (ITA). The
ITA is a multiplurilateral trade
agreement that requires par-
ticipants to eliminate their
tariffs on a specific list of
information technology (IT)
and telecommunications
products. The agreement cov-
ers approximately 95 per-
cent percent of world trade in
defined IT products, which is
currently estimated to exceed
US$ 1 trillion. Products cov-
ered under the ITA include
computer hardware and
peripherals, telecommunica-
tions equipment, computer
software, semiconductor
manufacturing equipment,
analytical instruments, and
semiconductors and other
electronic components.
* See, for example, Small
Enterprises Adjusting to Lib-
eralization in Five African
Countries http://www.world-
bank.org/afr/findings/eng-
lish/find42.htm, which states,
“A majority of survey respon-
dents (62- to 90% percent)
considered lack of access to
credit (mainly for working
capital) a major constraint
on their operation.” In addi-
tion, in Doing Business in
2006, the worldWorld Bank
ranked Mali in the bottom ten
out of 155 countries in terms
of regulatory burden on busi-
ness. Nine out of the bottom
ten countries were in sub-
Saharan Africa: the Democra-
tic Republic of Congo, Burkina
Faso, Central African Repub-
lic, Chad, Sudan, Niger, Togo,
Congo Republic, and Mali.
10 Promoting Private Sector Investment and Innovation
Impediments to Growth
Although IKON’s business model shows
strongly positive cash flows, employs
robust, appropriate technology, and
meets a social need, Dr. Romain-Roland
Tohouri reports that the project has
had great difficulty procuring the neces-
sary funding. Business loans in Mali typ-
ically require up to 80 percent collater-
al, and according to Dr. Tohouri, the effec-
tive import duties on computer hardware
are in the neighborhood of 50 percent.
The table below benchmarks Mali to
the United Kingdom.
It is worth remembering that these
duties are levied on the “Cost + Insurance
+ Freight” value (CIF), which remains
roughly constant across countries, while
the per capita GDP of the United King-
dom is US$ 26,507, over 100 times the
per capita GDP in Mali, estimated in
2004 at US$ 260.2
Lack of access to financing conforms to
findings in other reports for the World
Bank.∗
Greater access to credit is especially
important for dynamic small- and medi-
um-scale enterprises whose growth
potential outstrips the financing attain-
able from internal or informal sources.
Measures to improve the accounting
practices of firms and their ability to pro-
vide audited statements can improve
creditworthiness by reducing the cost to
banks of obtaining reliable information.
Banks’ concern with risk can be
addressed through better legal systems
to document and collect property offered
as collateral. Competitive banking is
essential to give banks incentives to
seek new, smaller clients.3
Additionally, the project directors cited a
lack of job applicants qualified in the use
of ICTs. It was their feeling that the cur-
rent university curriculum does not ade-
quately prepare students for the informa-
tion age. REOnet is attempting to address
Malian Import Duties on Technology Compared with the United Kingdom
Tariff on Computer
Hardware
Mali 5%
United Kingdom# 0%
Source : US Dept. of Commerce, Office of Technology and Electronic Commerce
Case Studies
The Challenges of Doing Business in Mali
The challenges of launching a business in Mali are shown below. Entrepreneurs can expect
to go through 13 steps to launch a business over 42 days on average, at a cost equal
to 190.7 percent of gross national income (GNI) per capita. They must deposit at least
490.8 percent of GNI per capita in a bank to obtain a business registration number.
INDICATORS MALI REGION OECD
Procedures (number) 13 11 6
Time (days) 42 63 19
Cost ( percent of income per capita) 190.7 215.3 6.5
Min. capital ( percent of income per capita) 490.8 297.2 28.9
Source : Doing Business in 2005: Removing Obstacles to Growth
this issue with workshops in the use of var-
ious multimedia software applications.
The high cost of Internet access also
impedes growth. Currently, IKON pays
200,000 FCFA per month, or roughly
US$ 400, for 128 Kbit/s dial-up service.
Although this is at least 200 times more
expensive than comparable service in
developed countries, IKON is able to pay
such access fees, but if the company
wishes to increase the volume of images
transmitted or add any videoconferenc-
ing capabilities, whether for instruction
or for real-time diagnosis, costs will
have to come down.
Another impediment facing Project IKON
is latency, defined as the time needed to
transmit traffic over a network. At present,
Mali does not have an Internet exchange
point (IXP), which means that all traffic
between Internet service providers must
pass through international backbones,
increasing cost and latency. As the follow-
ing illustration shows, serious latency
exists in Mali. The author loaded REOnet’s
web page from a location in Bamako, using
a connection on a competing ISP. Although
the author was only five kilometers away,
the traffic was routed through Senegal, Por-
tugal, Spain, two different stops in France,
Italy, and finally back to the African con-
tinent. Such latency precludes real-time
videoconferencing. It has been estimated
that the use of international bandwidth for
Tariff on Computer Tariff on Computer Tariff on Other
Parts Software Manuals Taxes
Unknown 20% 0% 5% customs service
fee on CIF value;
7.5-55% additional taxes
0% 0% 0% 17.5% VAT
Case Studies

Lack of Internet Exchange Points Creates Latency.

In South Africa, the highest
incidence of TB occurs in
Cape Town, with 678 cases
per 100,000 of population in
2003. 6 The city of Cape
Town provides free medi-
cine to TB patients, who
must take at least four
tablets five days a week for
six months. It is essential
that patients follow this drug
regime exactly; if patients
skip doses, they become
“multi-drug resistant.”
Tuberculosis exacts an enor-
Africa has the most expensive broadband costs
mous economic burden on
individuals and societies in
1000 SSA. In Africa as a whole,
US$ Broadband prices per month

900 the mortality rate from TB is

800 three times the global aver-
700 age, and more than twice as
600 high as the next-worst
500 region, with 538,000 deaths
400
in 2003.7 The cost of treat-
300
ment is also burdensome.
For “normal” TB (as
200
opposed to MDR-TB), the
100
drug regime costs approxi-
0
Africa Americas Asia Europe Oceania mately R 600, nearly US$
100, per month. Drug-
Notes: (a) Prices as of July 2003; (b) ITU calculation for Africa is based on a limited resistant tuberculosis is
number of countries due to scarcity of data.
Based on data from Birth of Broadband. September 2003, ITU even more costly. South
Africa has been identified by
local or regional Internet traffic costs the the World Health Organization (WHO) in
African continent as much as US$ 400 mil- its latest report on global drug-resistant
lion per year.4 tuberculosis as one of the ten MDR-TB
hotspots.8 For MDR-TB, medication costs
Lessons learned are R 30,000 (US$ 5,000) per month.
As is the case throughout Africa, there is
latent demand for ICT-enabled health Project design
services in Mali. In order to increase SIMpill is the brainchild of a doctor in Cape
access to ICT, connectivity costs will Town, South Africa, who sought to address
have to reduce, and access to capital the issue of non-compliance among tuber-
increase. Mali will also have to refocus culosis patients on long-term drug
its educational efforts toward creating regimes. This product consists of a pill bot-
ICT-savvy potential employees. tle that sends a short, time-stamped text
message (SMS) to a central server each
II. SIMpill time the top is removed. If the server does
In absolute numbers, as well as on a per- not receive an SMS at the predetermined
capita basis, SSA faces a severe tubercu- time, the server in turn sends an SMS to
losis crisis. Nine of the 22 “highest-burden” the patient reminding him to take his med-
TB countries are in SSA: Nigeria, Ethiopia, ication. In a pilot study, the SIMpill On-Cue
South Africa, DR Congo, Kenya, Tanzania, Compliance Service reduced non-compli-
Uganda, Zimbabwe and Mozambique. ance by approximately 26 percent.
Together, these countries accounted for 80 For the pilot phase of SIMpill’s On-Cue
percent of global tuberculosis in 2002.5 Compliance Service, the project gave 221

Promoting Private Sector Investment and Innovation 11


Schematic Diagram of SIMpill Service Delivery
Pill Box
Send SMS
GSM Wireless network
when opened
Patient takes
medication
Text reminder
to take medication
Patient's handset
Text notifying care
Care giver visits
or calls patient
Care giver's handset
Source: www.simpill.com
patients a SIMpill bottle, and monitored
compliance. The City of Cape Town
assumed the cost of the bottle and the
SMSs, from both the pill bottle and the
central server to the patient’s phone in
the event of non-compliance. For this,
SIMpill charged the City R 150 (US$ 23)
per patient per month.
Methodology
Patients are issued their medication in a pill
bottle that contains a SIM card and battery.
When the top is removed, a time-stamped
SMS containing an identifying code is
sent to a server for logging purposes. If the
message is received within a predeter-
mined period, the SMS is simply recorded.
If no message is received, the patient is
sent an SMS reminding him to take his
medication. The system also provides the
ability to escalate the response by con-
tacting a health care provider or family
member in the event of persistent non-
compliance. When compared to the
* The existing protocol is existing protocol for MDR-TB∗, the results
known as Directly Observ-
able Therapy System (DOTS).
of the pilot study were ambiguous at
Essentially, this means that the best. According to the bridges.org “Eval-
patient comes to a clinic sever-
al times daily, and is observed
uation of the Compliance Service,”
while taking medication. “With the exception of a slightly higher
Cost-Benefit Comparison : DOTS vs, SIMpill
• DOTS (Directly Observable Therapy System)
1) Lost wages – 120 visits, or approx. 150 hours’ lost wages
2) Travel costs – 69% of patients in pilot study spent an average
of R8 (approx. USD1.40) each way R16 X 120 = R1920
• SIMpills
1) Fewer lost wages – 27 visits, or 33.75 working hours
2) Lower travel costs – R16 X 27 = R432
12 Promoting Private Sector Investment and Innovation
Case Studies
Server receives SMS and stores data
Or
If no SMS is received then server
notifies patient on handset
Or
If still no response after a time
after prompting, care giver is contacted
by server
giver of problem
completion rate for the pilot, treatment
outcomes are very similar. It is not pos-
sible to assign any statistical significance
to the difference in treatment success
rates, due to the limited sample size. At
first glance, all that can be said is that the
Compliance Service has produced results
that are normal for this clinic, but do not
demonstrate a significant improvement.”9
However, despite less-than-hoped-for
results from the pilot project, there are
several mitigating factors. First, the
pilot study was rushed into existence
without adequate training of healthcare
providers. As a result, the pilot clinic may
not have fully “bought in” to the On-Cue
Compliance service. Additionally, few
healthcare providers spoke Xhosa, and
the SMS protocol employed only allowed
for ASCII characters, so languages such
as Kiswahili did not work for SMS. This
last issue is easily fixed, and has been.
With adequate training of clinic workers,
the issue of “buy-in” should also be
resolved, and the SIMpill On-Cue Com-
pliance service will enable individual
healthcare providers to supervise the
medication regime of a greater number
of patients, at lower cost in terms of lost
wages and travel costs to the patient. As
the box below shows, the alternate
method of addressing non-compliant
patients, Directly Observable Therapy
System (DOTS), incurs costs to the
patient in the form of travel costs to a
clinic for observation while taking med-
ication, as well as lost wages for each
visit. Because SIMpill’s On-Cue Compli-
Case Studies

Impediments to growth
100%
8.5 4 In South Africa, mobile phone coverage is
15 14
90% 20.5
20 not an issue; 71 percent of South Africa’s
80% 20
23 22 population has cell phone coverage.13 Nor
70% 7
35 13 does mobile phone penetration appear to
60%
15 be a problem; 50 percent of the patients in
50% 21
the pilot study were unemployed, yet they
22
40% still had a cellphone. In addition, according
69
30%
49
58.5 to SIMpill’s own data, 88 percent of the
20% 41 patients always kept their phone with
32.5
10% them and fully charged.
0% Obviously, issues such as mobile phone pen-
1-7 8-14 15-21 22-28 29-35
days days days days days etration and the availability of electricity are
germane elsewhere, as are behavioral issues,
Missed Reminded
Wrong time Right time which include the practice of sharing phones,
or the issue of social taboos associated with
ance System requires fewer visits per infection status. The cost of purchasing a
patient, individual costs are lower. In handset is also a concern, even though
addition, each healthcare provider is able efforts are underway to lower this cost.
to observe a greater number of patients, For all of these reasons, a better model for
further lowering treatment costs. rolling out the SIMpill On-Cue Compliance
Furthermore, the following graph shows Service continent-wide would be to make
that some learning did take place, and that the pill bottle a closed communication loop,
over the life of the project, compliance rates meaning both a transmitter and a receiver.
did go up, as indicated by the green and Currently, the SIMpill bottle merely acts as
blue bars, representing time-appropriate a transmitter, but there are examples of
“medication events” and “reminders,” hardware that receives “pushed” informa-
respectively. Not only did the sum of these tion from wireless networks.∗∗ In other
two events increase over time, but also the words the pill bottle, in addition to sending
number of reminders required decreased. an SMS notifying the care giver that the
patient has taken his medication, could also
Prospects for growth glow, vibrate, or simply provide a readout
Given the high incidence of TB in SSA, when it is time to take medication.
the prospects for growth of services are
substantial.10 In addition, the SIMpill Lessons learned
technology would apply for any patient SIMpill’s On-Cue Compliance service
undergoing long-term medication ther- demonstrates that, with proper attention
apy, such as HIV/AIDS, diabetes, epilep- to local environments, and if localization
sy, or hypertension. issues such as language and power sup-
From 2003-2005, SMS traffic in South ply are addressed, ICTs can be used as
Africa increased by 1000 percent.11 Such a tool to foster progress on the Millenni-
growth is obviously unsustainable, but um Development Goals. Additionally,
indicates the degree of acceptance of this project demonstrates one way in
SMS as a method of communication. Fur- which value-added service providers
thermore, as the preceding graph shows, are using existing technologies in ways
although there appears to be a “learning their inventors never envisaged. Perhaps
curve” with respect to compliance, both most importantly, this project demon-
* 30,000,000 x 365 =
among the sample population as a whole strates that, in instances where informa- 10,950,000
and also among those needing tion and communication services pro-
** An example of this is the
reminders, there will in all likelihood duce positive effects, public-private part- the Ambient Devices Orb
always be some who need reminding. nerships are appropriate. Although the (www.ambientdevices.com),
which delivers real-time infor-
Furthermore, as of 2003, there were 30 narrowly defined value chain may by mation on stock prices, the
million inhabitants of SSA living with itself be insufficient to justify infrastruc- weather, or any of several
user-configurable options.
HIV/AIDS.12 Even one SMS a day (indi- ture rollout, the net social benefit of The Orb picks up signals from
cating that they did, in fact, take their decreasing the instance of multi-drug- the wireless network in the
United States without needing
medication) would produce nearly 11 bil- resistant tuberculosis far exceeds infra- of a wired connection to a net-
lion SMSs per year.∗ structure costs. work.

Promoting Private Sector Investment and Innovation 13

 Case Studies

III. Pésinet Project design

Sub-Saharan Africa possesses the highest Pésinet is an early-warning system for
child mortality rate in the world, at more identifying at-risk children in Senegal.
than one child in six. The World Health Recognizing that weight increase is high-
Organization lists SSA as “stagnating” in ly correlated to the overall health of a
progress toward the Millennium Develop- child, Pésinet representatives weigh sub-
ment Goal of reducing child mortality.14 scribed children twice weekly, and these
Furthermore, according to the World data are plotted on a growth curve to
Health Organization, “most deaths among ensure that the children are gaining
under-fives are still attributable to just a weight at an appropriate rate. Anom-
handful of conditions and are avoidable alous changes in weight trigger an exam-
through existing interventions. Among ination by a doctor. This service has
these are pneumonia (19 percent of all proved extremely effective at preventing
deaths), diarrhea (18 percent), malaria (8 the leading causes of childhood illness in
percent), measles (4 percent), HIV/AIDS (3 SSA, as well as in reducing child mortal-
percent) and neonatal conditions, mainly ity among the sample population.
pre-term birth, birth asphyxia, and infec- Pésinet targets 0-5-year-olds in Saint
tions (37 percent).”15 Louis, Senegal. Founded with the support
of Afrique-Initiatives, Pésinet is based on
a subscription model and currently
Under Five Mortality Rate, Senegal reaches 8 percent of children in Saint
Louis16 in nine different quartiers of the
180
city. Two “Agents de Pesée” (ADPs or
160 weighing agents) cover each district, a
140 total of 18 ADPs.
120 As of mid 2005, Pésinet had approxi-
100
mately 2000 babies enrolled in the
service. The monthly subscription fee is
80
approximately 150 FCFA (roughly US$
60
0.30), but the fee is tiered and declines
40 with the number of babies per house-
20 hold.17 Although this fee is the only
0 source of revenue for Pésinet, Awa
1990 1995 2000 2003 Gueye Fall, the project director, described
Senegal AVG SSA World Avg. this fee as largely “symbolic”18, citing the
Source: World Health Organization and World Bank data common tendency to undervalue that
which is offered freely. As will be seen
later, this fee is symbolic in another
Percentage Change Over Previous Data Point sense, in that revenues collected cover
around 16 percent of project costs.
12% In addition to the usual overhead costs
for rent and electricity, Pésinet has
10%
salary costs of 13,800,000 FCFA (rough-
ly US$ 28,000) per year, which covers the
8%
18 ADPs, the director, an assistant direc-
6%
tor, and the two doctors.
From a mortality and morbidity perspec-
4% tive, the results of this project have
been impressive. During its pilot phase,
2% among 1500 enrolled children, eight
died. This compares extremely favorably
0%
1995 2000 2003
to the expected number of 137 children,
based on mortality rates for 0-5-year-olds
Senegal all SSA World avg. in Senegal. Although, as with SIMpill,
Senegal is decreasing under-five mortality, but at a decreasing rate (“stagnating”), some self-selection in the sample for this
and at a rate far below the world average pilot study almost surely occurred, from
Source: World Health Organization and World Bank data
a purely cost-benefit standpoint, the

14 Promoting Private Sector Investment and Innovation

Case Studies
Presenting Pathologies among Children Enrolled in Pésinet
Nutrition
24%
Malaria
Skin infections and fever
13% 11%
Other
11%
Diarrhea-related
Illness
22% Respiratory
Infections
19%
Source: Dr. Massaer Dioum, consulting physician
use of information and communication
technologies to deliver its services
unquestionably adds value.
According to Awa Gueye, around 20
percent of the enrolled children require
visits to the doctor each month. As the
following graph shows, the reasons for
the visits correspond strongly with the
leading causes of death among chil-
dren, indicating that the Pésinet model
is effectively catching the leading caus-
es of death among children in SSA.
Methodology
An Agent de Pesée visits each home
twice weekly and weighs all enrolled chil-
dren. It usually takes the ADP half the
day to complete her appointed rounds,
so in the afternoon, the ADP enters the
collected data into an Access database at
the Pésinet office. These data are then
presented graphically through a Web
interface to the consulting physician, who
receives an email when new data are
recorded. When two successive weights
for a given child are deemed anomalous,
the physician emails the project director,
who phones the ADP. The ADP in turn
visits the household and arranges a
visit to the doctor, the cost of which is
covered by the subscription.
Prospects for growth
With roughly 8 percent of children in
Saint Louis enrolled, growth prospects
for this project could be strong. Howev-
er, before this can happen, the business
model must change drastically, since
revenues currently cover only 16 percent
of costs. The rest of the operating rev-
enues come from Afrique Initiatives.
To address the gross imbalance between
revenues and expenses, the project
should consider some combination of
raising prices*, increasing the number of
families subscribed, and increasing the
number of services delivered. Pésinet
could consider providing additional
health consultation services to mothers,
perhaps addressing issues such as
maternal health and family planning.
Pésinet must also attack the problem on
the cost side. Increases in sales volume
should not be accompanied by a com-
mensurate increase in the number of
ADPs. In order to achieve economies of
scale, Pésinet should leverage technolo-
gy. Using personal digital assistants,
ADPs could eliminate the need to input
the data into the database manually, and
could instead see twice as many children,
perhaps even extending the project’s
reach into rural areas surrounding Saint
Louis. At the end of the day, the data
could be transmitted as a batch. When
the physician wanted to arrange an
appointment with a child, he could email
the ADP directly on the same PDA.
The use of PDAs would have favorable
consequences for network operators as
well. The daily transmission of data
would mean additional traffic on the net-
work. Additionally, through growth of
Pésinet’s subscriber base, the number of
doctor’s appointments, and thus commu-
nications between the doctors and the
Agents de Pesée, would also increase.
Impediments to growth
The technologies used in the delivery of
services are not complicated, and pres-
ent no impediments to scalability. How-
ever, cash flow is desultory, and Pésinet
can only cover 16 percent of its operat-
ing costs. Scaling up this project would
increase budget shortfalls in absolute
terms, and the burden on the supporting
donor organization, which expected to * “As a price comparison,
end its subsidy of Pésinet in September the cost of a mango in Sene-
gal is CFA 150 (US$ 0.26) in
of 2005. season, mangos being a com-
mon, readily-available prod-
uct.” “What Works”, p. 9. In
Lessons learned other words, currently, the
Pésinet illustrates the importance of cost of the service is roughly
the equivalent, on a per-child
marketing services in a location-appro- basis, of buying one mango
priate manner. Word-of-mouth may not per month.
Promoting Private Sector Investment and Innovation 15

be the most effective method for market-
ing value-added ICT services in developed
countries, but in a country with closely-
knit communities, low literacy rates,
and a strong oral tradition, marketing via
local interaction may be the best method
of attracting new customers.
Another lesson echoes the SIMpill proj-
ect: the importance of tailoring the serv-
ice to local needs. It is doubtful that net-
work operators envisaged employing
their network to analyze data on chil-
dren’s weights over time. The lesson is
that if the infrastructure is in place, and
human capacities are sufficient, individ-
uals and companies in SSA will devise
innovative uses for the infrastructure.
IV. Manobi
Information asymmetry between com-
modity producers such as fishermen or
farmers, and the middlemen to whom
they sell, can lead to loss of income for
the producers, typically the rural poor.
A Senegal company called Manobi
attempts to address information asym-
metries by giving farmers and fishermen
real-time access to price information.
Thus, commodity producers are able to
send their products to market on days
when prices are strong, and can with-
hold products on days when oversupply
drives prices below what producers are
willing to accept.
Project design
Manobi is a multi-channel services
provider delivering market information
to farmers and fishermen in Senegal.
Since the founder of the project had a
background in agriculture, the project
initially focused on delivering price infor-
mation to farmers. From offering this
service to farmers, it was a natural
extension to offer price data to fisher-
men. In 2003, Manobi conducted a
needs-assessment exercise involving
fishing unions and telecom operators.
Demand was found for two-way commu-
nication at sea; fishermen wanted price
information from the source, rather
than through the middlemen who met
them at the water’s edge. Later, addition-
al benefits of two-way communication
technology became apparent. Able to call
and be precisely located by GPS to be res-
16 Promoting Private Sector Investment and Innovation
Case Studies
cued in the event of a disaster at sea,
fishermen can obtain insurance; they can
also check meteorological information.
Manobi’s Xam Marsé service lets farm-
ers check prices in several markets
remotely, enabling them to sell where
they can obtain the best price. Wishing
to capitalize on the two-way nature of
mobile telephony, Manobi realized that
the search-and-rescue capability avail-
able to fishermen could be adapted to
include fleet vehicle tracking, which
led to contracts with the largest Sene-
galese company: Société de Distribution
des Eaux, the municipal water supplier
in Dakar. Dispatch operators can locate
trucks nearest to reported water leaks,
cutting down response time and saving
water in the process. According to
Manobi, each vehicle sends, on average,
800 SMSs per month and generates
roughly US$ 24 per vehicle per month.19
Manobi further expanded its service by
offering a mobile phone-based land
surveying and transaction tool. Using
municipal data on land titles, Manobi
can offer precise coordinates to prospec-
tive land buyers, including data on
water percolation. Manobi has begun
such a service for the municipality of
Sangalcam in Senegal. Sangalcam pays
roughly US$ 8 per hectare to Manobi,
and in exchange, municipal workers are
issued PDAs linked to a central database
containing data on all land in the munic-
ipality. In addition to the social benefit
of shortening the time necessary to
purchase land from five months to ten
days, and drastically reducing the num-
ber of land claims, Manobi’s GIS service
also generates three to four SMSs per
transaction.20
Methodology
For Xam Marsé, Manobi employs data col-
lectors who directly observe and record
market prices in three locations in Dakar
and Kayar. These data are then transmit-
ted by cellphone to a central database,
where they are accessible via the Web or
on any phone via SMS (using “push” tech-
nology). To access this information, farm-
ers and fisherman pay around US$ 5 per
month, plus the cost of SMSs. According
to Manobi, the average farmer generates
roughly two minutes of WAP transaction
Case Studies

Mobile Telephony in Senegal

and approximately five minutes of voice
telephony per working day. On a month-

(x1000)
90
ly basis, the overall ARPU (voice and data)
80
is US$ 30, of which US$ 12 go to Manobi
and US$ 18 to Sonatel.21 70

Information also flows in the other direc- 60

tion on Manobi’s network. Buyers can 50
issue a request for large quantities of
40
agricultural goods, and Manobi serves as
30
an aggregator of transactional informa-
20
tion related to goods supplied by small
farmers. Thus individual farmers can sell 10

to such large entities as the French 0

2000 2001 2002 2003
Army base in Dakar, which typically
orders between two and three tons of Fixed-line subscribers
Cellular mobile telephone subscribers
fruit and vegetables monthly. According
to Manobi, transactions with the French Source: data from the World Bank, graph by the author

Army alone generate US$ 18 of GSM net-

work traffic per month.
Impediments to growth
Prospects for growth However, Manobi has struggled in the
Manobi claims that farmers are able to face of several impediments. Initially, the
increase their income by at least 30 per- size of the mobile network limited the
cent22, more than offsetting the cost of company’s reach out to sea. Sonatel, the
the service. Manobi has decided to telecom operator, rectified the problem
broaden its services to include fleet by installing a base station in Kayar, a
vehicle tracking and geolocation using fishing village north of Dakar. Mobile cov-
GPS. Given recent growth in mobile erage is still an issue in rural areas of
phone penetration and projections for Senegal however, and commodity pro-
future growth (see graph), it would ducers have been slow to subscribe to the
appear that Manobi enjoys strong service, even when Manobi offered a free
prospects for growth. basic version of the service.∗
The slow uptake of Xam Marsé illustrates
the importance of achieving buy-in from
all stakeholders, including potential con-
Mobile Phone Coverage in Senegal
sumers. To date, Manobi has focused its
efforts on developing rather than market-
ing its services. Sonatel, which holds a
Mauritania
Richard-
Podor significant equity stake in Manobi and,
Saint-Louis Toll as the network provider for Manobi’s
Matam Multi-Channel Service Platform, also
Linguère stands to gain from increased traffic from
Dakar Manobi’s site, could also increase its
Thiès
Diourbel efforts to market Manobi’s services.
Nayé Mali
Kaolack
Lessons learned
Tambacounda
The Gambia By convincing Sonatel to install a BTS in
Kayar, Manobi illustrates the impor-
Bignona Kolda tance of value-added services in driving
Ziguinchor Kédougou
infrastructure rollout. Additionally, the
Guinea- experience of Manobi demonstrates the
Bissau
important role that network operators
can play in marketing value-added serv-
Guinea ices on their network. Such win-win * Starting in May of 2005,
Manobi offered farmers SMS
opportunities should be explored more market price information for
fully in other parts of SSA. one product for free.

Promoting Private Sector Investment and Innovation 17


V. MoPay
According to some estimates, as much as
81 percent of the sub-Saharan popula-
tion may be “unbanked”, i.e. without
access to formal banking institutions.
The size of this informal economy has
several implications. Chief among them
is the risk of theft, an all-too-common
occurrence in South Africa. The atten-
dant difficulty of transporting large
sums, particularly over distances, also
places geographical limits on financial
transactions.
Of greater importance from a societal
standpoint is the fact that, by staying in
the informal sector, holders of cash can-
not use money to create wealth using
loans or other credit instruments. The
money multiplier is not allowed to work,
since the money is not in the system.
Project design
MoPay is a mobile-banking service based
in South Africa. This service uses simple
SMS messages and Personal Information
Numbers (PINs) to allow customers to
top-up pre-paid services, pay bills, and
conduct transactions between buyers
and sellers.
Rather than employ a software or hard-
ware solution, MoPay was designed to be
technology-neutral and platform-inde-
pendent. Although SMS is the most
usable service delivery channel for
MoPay, the platform features a number
of interfaces designed to support other
access channels. These include Web,
ATM and Interactive Voice Response
(IVR). Unlike other examples of mobile
banking, which require special hardware
such as a “smart card” or a dedicated
SIM card, all sensitive data reside on
MoPay’s servers. This deceptively simple
system provides greater security from
‘hackers’ than systems in which data are
stored on individual handsets. In addi-
tion, all sensitive data are encrypted, and
there is a complete audit trail for sub-
scriber and administrative operations.
There is also no problem of bounced
checks, since the payment clears right
away.
Methodology
For the individual consumer, there is no
cost to use MoPay’s services; even the
SMSs are paid for. He simply goes to a
18 Promoting Private Sector Investment and Innovation
Case Studies
cooperating bank or merchant; registers
his phone number and bank account, if
one exists, via a simple web interface;
and selects a Personal Information Num-
ber. If the consumer does not have a
bank account, there are two options: he
can exchange cash for an SMS message
to his phone, transferring an equal sum
to his virtual account, or he can pay cash
for a MoPay/Visa-branded cash card
that functions like any other debit card.
The vendor or merchant pays the costs
associated with using MoPay’s services,
on a per-transaction basis. Fees range
from 3-5 percent per transaction, with
some larger merchants paying a flat fee
per transaction. Merchants receive a
unique vendor number enabling them to
receive payment from a client. A hosted
platform authenticates end-users and
manages payment authorization, provid-
ing confirmation and settlements for
mobile payment processing.
To make a payment via an SMS, the pur-
chaser sends an SMS similar to the fol-
lowing: 2 [main menu item: pay] > PIN
> amount > vendor number. MoPay ver-
ifies the identity of the purchaser by
matching the mobile number and pass-
word with the purchaser’s records stored
in the database. MoPay then sends an
SMS to the vendor similar to the follow-
ing: “ABC Products: You have received
payment of R 127.50 from mobile no
+2782505050”
Alternatively, the vendor can initiate
the payment-clearing process. When
making a purchase, the purchaser pres-
ents a MoPay-branded pre-paid debit
card. The merchant system recognizes
the purchaser as an ID checker™ user
and sends a payment request to MoPay
for ID verification. MoPay then sends a
SMS to the purchaser requesting PIN
confirmation of the purchase from the
previously registered mobile phone, to
which the purchaser responds. MoPay
verifies the identity of the purchaser by
matching the mobile number and pass-
word with the purchaser’s records stored
in the database. Following this, MoPay
forwards successful payment authentica-
tion information to the merchant. The
merchant processes payment and com-
pletes the transaction. The data required
to process payments can be uploaded
Case Studies
onto the platform’s database either via a
batch process designed to meet partici-
pant banks’, operators’ and merchants’
needs, or through a real-time, on-line
interface.
Cobus Potgieter, CEO of MoPay, states:
“Bottom-line is, according to current
clients of the MoPay systems, that not
only do they and their clients experience
real cost savings but also enhanced serv-
ice and security levels, with the commen-
surate expansion of their markets.”23
“It’s very cost-effective, quick and easy to
use,” says Craig Bouwer, president of
Aztec, a company that specializes in
supplying and leasing office equipment.
Using MoPay has saved Bouwer’s compa-
ny three times what he would have paid
had he installed a normal Speedpoint sys-
tem. The cost of using MoPay is a lot
more affordable than renting a Speed-
point, which can cost between R 600 and
R 1,000 a month, says Bouwer.24
There are additional advantages over
conventional credit cards, since there is
no need for “Speedpoint” credit card
machines or a fixed line. As a result,
informal market vendors can send and
receive payments with lower payment
processing costs and improved cash flow.
Prospects for growth
Given the strong uptake of mobile teleph-
ony in SSA and the large percentage of the
population that remains “unbanked,”
MoPay faces strong prospects for growth.
The appeal to the consumer is obvious.
Increased security from theft and conven-
Uptake of New MoPay Merchants by Month
400
350
300
250
200
150 136
102
100
68
50
12 18
0 phone.” Quoted in “Stimulat-
1 2 3 4
"Banked" "Unbanked"
ience, particularly in the realm of foreign
remittances, make MoPay an attractive
prospect. Additionally, part of the appeal
of MoPay is its simplicity. Even for the illit-
erate, MoPay’s simple commands are
easily learned.∗ As for account security,
MoPay compares favorably with its com-
petition. Unlike Java-based banking appli-
cations, the security risks are limited to
the physical security of MoPay’s servers.25
Currently, there are 134 service
providers or local sales capacities, includ-
ing social franchisees, using the MoPay
system, with projected uptake of at least
350 by the last semester of 2005.# MoPay
has made the following sales projections:
Although service uptake in the preced- # Recently, MoPay has
ing graph is greater among the “banked” announced that it has exceed-
ed its projections and now
segment of the population, Metcalf’s has 400 vendors of its servic-
Law, which states that the value of any es.
network is proportional to the square of * Skeptics have expressed
the users, almost certainly applies. As the doubts about the ability of the
Grameen Village Phone entre-
value of the MoPay network increases, preneurs’ ability to use a tele-
uptake among the unbanked segment of phone, given their total lack of
experience with telephones
the population should increase, given the and their low literacy rates. .
near-zero cost of entry. Responding to such skeptics,
Muhammad Yunus, President
The table below lists some of the types of the Grameen Bank stated:
of merchants accepting payment through “[P]eople kept asking, well
she is illiterate,illiterate; she
MoPay’s m-banking service. wouldn’t even know to push
those buttons and dial a num-
ber and so on. So I said,
Impediments to growth
there are only ten numbers.
MoPay is wholly self-financed and is So if this pushing these num-
bers can bring income,
debt-free, so investment capital presents money, I think she will learn
no impediment to growth. Also, MoPay it in ten minutes. That is not
a big deal … learning those
faces no legal or regulatory constraints. numbers. “About five or six
Moreover, mobile coverage does not months later I was going
around in the villages talking
limit growth; the mobile coverage area to the women who got this
in South Africa comprises 90 percent of new telephone about how
they were doing. They were
all delighted, excited about
the phone. Everybody has a
phone in her hand when
we’re talking about it. At the
middle of the discussion, I
asked, do you have any prob-
lem in pushing those buttons
374 to dial a number? Everyone
240 said, no we don’t have any
306 problems. . We can do that.
So one woman stood up and
272 said why don’t you give me a
238 number and blindfold me and
204 if I fail to dial it the first time
I will return your telephone.
170 I was stunned. I was stunned
because I wished that all
those people who had doubt-
ed in the ability of these
60 66
48 54 women were there. . These
36 42 were women who had never
24 30
in their lives seen a tele-
5 6 7 8 9 10 11 ing Investment in Network
Development: Roles for Reg-
Source: data from MoPay, graph by the author
ulators” p. 372
Promoting Private Sector Investment and Innovation 19
 Case Studies

Service Providers that Accept MoPay Payments

the land mass and 71 percent of the pop-
PROPERTY RETAIL ulation. Perhaps the single impediment
• Rents • Store- & affinity cards
• Levies • Home shopping / Mail orders MoPay faces is the relatively high cost of
and management fees • Liquor and food (FMCG), handsets, although virtually any handset
• Security deliveries
will do, since almost all of them accept
• Service contracts
• Parking fees SMSs. As this is going to press, MoPay
has announced that it is selling both new
EDUCATIONAL INTERNATIONAL SPORT
• Tuition fees & LEISURE and used low-cost handsets.
• Student mess fees • Golf fees and amenities
• Tickets - seasonal and per event
Lessons learned
TRAVEL & TOURISM ICT / WEBSITE / E-COMMERCE The rapid uptake of MoPay’s services
• Timeshare levies • Office automation – service indicates that there is a vast market for
• Platform reservations • contracts and maintenance
• Membership fees COMMUNITY & CONSUMER mobile banking services. In order to meet
• Conferences and exhibitions • Newspaper subscriptions this demand and market services simi-
• Airline tickets • Recurring advertising
• Car rental extensions • Traffic fines
lar to MoPay’s to the widest possible
audience, as well as ensure future com-
UTILITIES FINANCIAL & MEDICAL patibility, the service should be platform-
• Municipal charges • Insurance – monthly and pay-outs
• Telecom and postal • Medical – monthly and emergency independent.
box accounts • Collections and micro loans
• Television licences
and subscriptions,
also re-connections
Source: Cobus Potgieter, CEO, MoPay Systems, Inc.

1
“Stimulating Investment in Network Development: 12
http://www.queensu.ca/samp/sampresources/
Roles for Regulators” migrationdocuments/documents/2003/unaids.pdf
http://www.regulateonline.org/content/view/435/ 13
“Digital Divide Assessment of the City of Cape Town”
31/ , p. 72 p.19

IKON ENDNOTES: PESINET ENDNOTES:

2
World Bank databases (constant 2000 dollars) 14
http://www.who.int/whr/2005/
3
“Small Enterprise Responses to Liberalization in Five media_centre/facts_en.pdf
African Countries” http://www.worldbank.org/ 15
ibid
afr/findings/english/find42.htm 16
“What Works: Afrique Initiatives—Attempts at Com-
4
Via Africa: Creating Local and Regional IXPs to Save bining social Purpose and Sustainable Business”
Money and Bandwidth (draft discussion paper pre- http://www.digitaldividend.org/case/case_afrique_i
pared for IDRC and ITU for the 5th annual global sym- nitiatives.htm
posium for regulators) p. 6 17
The fee for enrolling two children is 250 FCFA per
month, 300 FCFA for three children, and 100 FCFA for
SIMpill ENDNOTES: each additional child.
5
http://results.org/website/ 18
Quoted in “What Works: Afrique Initiatives: —
article.asp?id=955 Attempts at Combining social Purpose and Sustain-
6
“Cape Town TB Control Programme Report”, City of able Business” p. 9
Cape Town Health Directorate, 2003. cited in “Evalua-
tion of the On Cue Compliance Service Pilot: Testing MANOBI ENDNOTES:
the use of SMS reminders in the treatment of Tuber- 19
Manobi Business Plan Annex A: Case Studies, Tech-
culosis in Cape Town, South Africa,” bridges.org, 29 nology, and Services (confidential)
March 2005 20
Ibid.
7
http://www.who.int/mediacentre/ 21
Ibid.
factsheets/fs104/en/ 22
http://www.manobi.sn/
8
ibid
9
“Digital Divide Assessment of the City of Cape Town” MOPAY ENDNOTES:
bridges.org, 2002, http://www.bridges.org, p. 18 23
http://www.biz-community.com/
10
WHO estimates that “1.75 million deaths resulted from Article/196/87/6411.html
TB in 2003. As with cases of disease, the highest number 24
http://www.bestkeptsimple.org/
of estimated deaths is in the South-East Asia Region, but month/2005-1.php
the highest mortality per capita is in the Africa Region, 25
M-banking systems which rely on applications on the
where HIV has led to rapid increases in the incidence of handset itself, are vulnerable to hackers.
TB and increases the likelihood of dying from TB.” See, for example,
11
“Digital Divide Assessment of the City of Cape Town” http://www.securitypark.co.uk/article.asp?arti-
p.26 cleid=24084&CategoryID=1

20 Promoting Private Sector Investment and Innovation

 Understanding Demand Patterns
Chapter 2:
For Information and Communication Technologies
In Developing Countries
“Today, a wide variety of new applications such as e-mail, e-commerce,
tele-education, telehealth, and telemedicine, among others, has made
access to interactive multimedia services as important as – maybe even
more important than – voice connectivity alone.”1

I
nformation and communication
services are highly valued in every
culture and at every income level,
and in the last five years, SSA has
seen the fastest growth of mobile teleph-
ony of any region in the world.2 In
developing countries, the average
amount spent on telecommunications is
2 percent of income.3 A recent Voda-
phone study found that “[T]here has
been a perception that the rural poor are
not able or willing to pay for mobile

BEGET LAUNCHES MOBILE AS PANIC BUTTON SOLUTION

Communications software developer Beget Holdings has launched a solution in South Africa that turns most cellphones into a mobile
panic button, alerting family and friends to a distress situation and pinpointing the sender’s location within five seconds.

“At present the SMSOS system operates with any cellphone with speed dialling and caller-ID capabilities on the MTN and Vodacom
networks,” says Andre Potgieter, Beget MD. “Exactmobile is the service provider for the SMSOS system and will provide 24-hour sup-
port through their call centre, as well as contributing knowledge and experience in the field of cellular technology.

Lize Gerber, SMSOS head, says crime is part of day-to-day living and welcomed the birth of SMSOS technology, which can be used
in any panic situation such as car accidents and medical emergencies. “SMSOS is ideal for any situation in which you can use only
one finger. “
Potgieter says by pressing the SMSOS speed dial or “panic button” on a cellphone, a priority SMS is relayed to each of the preset
respondents.

“This SMS includes personal and contact information, as well as the location of the person in distress using GSM coordinates. Multi-
media messaging enabled phones will also receive a location map and shortly, Vodacom subscribers will also have the benefit of
mobile tracking because of the kind of location server used by that network.”
The system’s ability to locate a cellphone depends on the cell coverage of the network provider, explains Potgieter. “The greater the
density of the network’s masts, the greater the accuracy of the location.”

Gerber says the main subscriber can register up to nine dependents and six respondents as part of the roughly R 250- R 300 per
year subscription package, and can easily maintain personal information through the Internet. “The SMOS system is automatic and
can handle 100 calls a second, thereby eliminating the problems of human error and slow response,” says Potgieter. “The system
also includes a logging facility and can generate complete audit trail reports on every call.”

Beget has reached an agreement with a French company for European distribution and a company in Australia for distribution there.
“Locally, the SMSOS is to be made available through a network of distributors to be appointed in the coming months, providing an
excellent marketing and income opportunity for distributors,” concludes Potgieter.
(Source: IT Web, quoted in http://www.balancingact-africa.com/news/back/balancing-act_206.html)

Promoting Private Sector Investment and Innovation 21

 Understanding Demand Patterns For ICT In Developing Countries

GSM Africa Coverage 2005

SPAIN
TURKEY Caspian
North A he s
Ath
Athens Sea
S

Atlantic Tangie
Tangier O
Oran
Algiers
Constantine
Tunis
SYR
SYRIA Mosul
su
Rabat Mediterranean Sea CYPRUS LEBANONN Berut
Be
erut Bagdad
CCasablanca Damascus
Damasc
masc
assscu
c
MOROCCO Ghard
Ghardaia TUNISIA
TU
UNISIA IRAN
IR
Tripoli ISRAEL jjerusalem
usalem
salem
IRAQ
Marrakech Banghazi
Canary Islands d
Alexandria
JORDA
DA
JORDAN
Suezz
(SPAIN)
N)) airo
Cairo KUWAIT
KUW
KU
UWWAITT
W
T
Tindouf ALGERIA
La'youn LIBYA
EGYPT
YPT
WESTERN
W Riyadh
SAHARA Al Jawf wan
Aswan
Medinah
Medina

Tamanrassett
SA
SAUDI ARABIA
ARAB
AB
Jeddah
Jed
ddah
dd
ddah

MAURITANIA MALI Port Sudan

Nouakchott
NIGER Red Sea
ea
a
Faya-Largeau
TTombouctou Agadez
Ne
Nema
ERITREA YEMEN
SENEGAL
SE
ENEG
GAL CHAD Asmera
A
Dakar
D Khartoum Sana
Niamey Zinder Al Mukalla
njul
Banjul GAMBIA
ul GAM
AMMBIA
MB Lake Chad
El Fashir Aden
GUINEA
GUI
GU BISSAU
NE B B o
Bamako BURKINA
RK
Bissau no
Kano N’Djamena DJIBOUTI
Ouagadougou
d o SUDAN
GUINEA Maiduguri SUD Djibouti

Conakry
BENIN Berbera
IVORY
IVOR Addis Ababa SOMALIA
Freetown
F TTOGO
GO NIGERIA
NIGER
SIERRA LEONE COAST
CO AS Wau
GHANA
G HAN CENTRAL
via Yamoussoukro
Monrovia
M Yamoussoukroo
Lome
e
Porto
orto Novo
Po
o ETHIOPIA
LIBERIA A Abidjan
ja Accra
A Lagos
CAMEROON
CAM AFRICAN REPUBLIC
Douala Bangui Juba
J Lake Turkana
Malabo
o Ya nd
Yaounde
EQUATORIAL GUINEA UGANDA
UG
U GANDA
Lake Albert
rt Mogadishu
Bata
a
Kisangani KENYA
Sao Tome Libreville
L Kampala
Kam
ampa
ampala
Victoria
Lake Victo
SAO TOME CONGO
ON
GABON
G ON
O ZAIRE RWANDA
A Na
Nairobi
& PRINCIPE Kigali
Kiga
gali
ga

vil
Brazzaville
BURUNDI Bujumbura
Buju
uju
ju ra
om asa
Mombasa
Indian
Pointe-Noire
Cabinda
Kinshasa
Kananga
ZA A
TANZANIA Ocean
Kalemie
(ANGOLA) Dar es Salaam
m
South Atlantic Luanda
L
Lake Tanganyika
Mbeya

Kasama COMOROS
ANGOLA ub
Lubumbashi
MALAWI
Benguela
Lake Nyasa
Kitwe
Huambo on we
Lilongwe
ZAMBIA
A MAYOTTE
Nacala
acala
Namibe Lusaka
a
Lake Kariba
riba Mahajanga
arare
Harare
MOZA
M AMB
A
MOZAMBIQUE arivo
Antananarivo
ZIMBABWE
ZI BAB
BWE Beira
NAMIBIA Bulaw
Bulawayo
BOTSWANA
B AN
NA R
MADAGASCAR
Windhoek
T
Tu
Tulear
SOUTH AFRICAA Walvis Bay
(Walvis Bay) Gaborone
aborone
Pretoria Maputo
uto
o
J
Johannesburg
Mbabane
aba
abane
ba
b
SWAZILAND
SWAZILAN
ND
N
Maseru
Durban
Durban
Du
ur
LESOTHO
HOO
1000 Km AFR
SOUTH AFRICA
Cape Port
1000 Mi. Elizabeth EEas
East London
T
Town
Source: GSM Association

telecommunications services. Yet in fact, have cited low Average Revenues per
in many instances, rural demand has User (ARPU), long payback periods on
greatly exceeded initial expectations.”4 investments, and murky regulatory envi-
Some of this is no doubt due to a lack of ronments as reasons for avoiding devel-
“legacy” copper-wire infrastructure. oping-country markets. In addition to
Vodaphone found that in South Africa, 85 these challenges on the supply side of the
percent of small businesses run by black market, the demand side also differs from
individuals relied solely on mobile rather that found in the developed world.
than fixed telephony. However, the same
phenomenon of small businesses provid- Problem of measurement
ing services such as plumbing or taxi In looking at demand for mobile teleph-
services relying solely on a mobile phone ony in SSA, subscriber numbers do not
exists in the developed world, indicating tell the whole story, since in rural areas
that the mobility inherent in mobile phones one phone is often used by many people.
is itself valued. To this one can add the problem of
Historically, low rates of penetration of ICT flawed income data in countries where
in SSA, coupled with rates of uptake that large sections of the economy exist sole-
have exceeded expectations, should have ly in the informal sector. “Income statis-
made technology providers eager to enter tics for Africa - especially at the lower
these markets, but until now operators end of the scale - have proved to be a

22 Promoting Private Sector Investment and Innovation

Understanding Demand Patterns For ICT In Developing Countries
LG LAUNCHES PHONE FOR MOSLEMS
Global IT leader LG Electronics has launched a new mobile
handset, the F7100 Qiblah phone, which caters to the prayer
needs of the Muslim faithful in Nigeria.
The new phone has a compass that points to Mecca and
comes complete with prayer time alarm functions. The Qiblah
indicator uses an inbuilt longitude and latitude orientation
or city references that, when used in comparison to the mag-
netic north, indicates the direction of the Qiblah so that Mus-
lims know in which direction to pray.
According to LG representative, Vishwas Saxena, LG is look-
ing to cater to the specific needs of Nigeria’s Muslim com-
munity. “I know people who are five times praying but they
are just so occupied and they miss the prayer timing. This
one will tell you when to pray and which direction to seat
(sic),” he said.
Source: http://allafrica.com/stories/200502170084.html
quoted in http://www.balancingact-africa.com
/news/back/balancing-act_245.html
very unreliable predictor of mobile usage
because of ‘informal markets and the
unreliability of existing income data,’”
writes Russell Southwood at Balancin-
gAct-Africa.org.6
Usage patterns vary in different markets
In addition to being characterized by
unprecedented uptake in SSA, the intro-
duction of mobile services has brought
about “a change in the business and
operating climate of the African telecom-
munication sector: competing mobile
operators have helped create an environ-
ment that fosters innovation and compe-
tition,”7 as illustrated by the case stud-
ies described earlier.
In profound ways, demand for ICT in
SSA differs from demand patterns in
developed countries. An individual con-
sumer is much more likely to share a
phone as opposed to owning it solely;
often, a mobile phone is considered a
household asset as opposed to a person-
al asset. Moreover, a lack of legacy
infrastructure extends beyond telepho-
ny. Due to a lack of financial infrastruc-
ture, including Automated Teller
Machines (ATMs), 70 percent of transac-
tions today in Nigeria are cash-based.8
Paul Lawal, the Managing Director of
Nigeria’s Inter-bank Settlement System
Plc, has expressed concern that over N
500 billion, or more than 20 percent of the
total monetary liabilities of the Central
Bank of Nigeria (CBN) in circulation in the
country, exists outside the formal banking
system. “Electronic payment is the order
of the day in all industrialized economies.
Nigeria, and indeed all emerging
economies, must deploy all appropriate
resources to develop their respective
payment systems,” he asserted.
Mr. Lawal also examined the state of the
nation’s payment system, and said that
the N 500 billion represents about 90
percent of the money supplied into the
system as of the first quarter 2005.
Money that stays in the informal sector
results in missed economic develop-
ment opportunities, diminished opportu-
nities for financial intermediation, and a
reduction in the efficiency of monetary
policy.9
In somewhat paradoxical fashion, a lack
of legacy infrastructure serves to rein-
force demand for mobile telephony, as
opportunity costs associated with phys-
ical travel can be so much higher. In the
absence of roads and transportation,
information and communication servic-
es are even more highly valued. Physi-
cal infrastructure influences demand
for information and communication
technologies in other ways as well. In
countries with frequent electrical out-
ages, there is a need for more frequent
backup of data and a greater use of
offline computing. In addition, so-called
“store-and-forward” email systems are
more common in areas with little band-
width or frequent power outages.
Access to electricity affects mobile phone
usage as well. Vodaphone found that
those without electricity are more like-
ly to borrow a phone, whereas those with
electricity are more likely to own one.
However, ownership and access are not
the same; the same study found similar
access to mobile telephony across income
brackets, 10 and found mobile phone
ownership less income-dependent than
other consumer durables.11
Rural and urban consumers are different
For the residents of rural communities,
information and communication tech-
nologies have great potential for positive
economic and social impacts, perhaps
Promoting Private Sector Investment and Innovation 23
 Understanding Demand Patterns For ICT In Developing Countries

iTOUCH BUILDS ITSELF A MOBILE DATA BUSINESS IN SA AND ROLLS OUT

even more so than for their urban coun-
IN MOROCCO
terparts, since alternatives are few. ICTs
reduce travel needs, assist in job hunt-
The iTouch Plc group is a media company that provides a wide range
ing, and provide better access to business
of information, entertainment and messaging services to mobile
information. These benefits occur even
users including regular news updates, weather alerts, download-
among the poorest communities.
ing ring tones and wallpapers, voting mechanisms on behalf of
Unfortunately, assessing demand for
media partners, etc. Recognizing the affluent market in South Africa,
information and communication tech-
iTouch launched the direct channel model (35050) there at the end
nologies among the rural poor in SSA is
of 2003, which enabled them to sell and deliver services and appli-
even more difficult than it is for the
cations directly to customers through Premium SMS short codes.
urban poor. Difficulties relating to poor
With operations in 25 countries at present, iTouch has become South
roads and language differences hinder
Africa’s leading mobile VAS provider of wireless data services and
the process of surveying demand among
products for both consumer and business markets, according to
this constituency.
Wayne Levine, Commercial Director at iTouch SA. “Vodacom statis-
The companies in the Case Studies
tics have shown that iTouch receives the highest volume of
employed various methods of assessing
requests,” he said.
demand for their services. In the case of
Of these requests, consumer demands predominate and are why
Project IKON, the founders of this compa-
their services are orientated around the consumer market. “We pro-
ny gathered at a conference of the Malian
vide two types of consumer services – ‘alerts,’ which are a suite
Linux Users Group (AMULL). The founders
of information and personalized reminders sent to the cellphone
of IKON were three medical students at the
as a short text message at a time specified by the user, and ‘MO
University of Bamako, so their orientation
services’, which stands for Mobile Originate and is where the user
naturally pointed to a health-related tech-
can pull content and products at any time.”
nology application. Dr. Romain-Roland
Current developments have demonstrated that these application-
Tohoury had written his doctoral thesis on
to-person (A2P) services, in which subscribers can receive informa-
tion and products by sending a text message, are most appealing
to mobile users, explained Levine. “Of all our users about 5 per- Do you share your phone with anyone else?
cent favor alerts whereas 95 percent prefer data when they want
100
it.” The popularity of the 35050 services, which offers ring tone and 12%
90
logo downloading among the many pickings, is evidence of this
80 88%
trend as it is “our biggest product,” he said. Marketed to a target
group of 16-24 year olds, Levine definitely credits the success of 70

35050 to the youth generation who “are the most aggressive in 60

terms of data services for cellphones.” 50

An interesting trend that Levine touched upon when asked about 40

the background of users was that many black South Africans were 30
attracted to their iTouch services and that iTouch SA actually “under- 20
estimated the popularity of our services within the ethnic commu- 10
nity and that they may even be more popular than in the white 0
community.” He put this down to the fact that while many white Do not share Share

South Africans had access to other means of communication, many Source: SIMpill Patient Survey

members of the black community “have limits to communication

devices so use their cellphones more to retrieve information.”
the contribution of telemedicine to med-
The accelerating growth in the sale and distribution of multi-media
ical diagnosis, studying exchanges
handsets and an ever-increasing market focused on device person-
between hospitals in Geneva, Switzerland;
alization, SMS short codes and premium SMS billing provides high-
Marseilles, France; and Point G Hospital
ly favorable conditions within Africa for iTouch overall. Levine con-
in Bamako, Mali. In the case of SIMpill,
cluded that there is “definitely demand for content services through-
David Green was working as a consultant
out Africa,” but iTouch are taking a cautious approach in regards
on managed care, disease management
to expanding across the continent, as “the ways in which African
and information systems, having written
businesses are run are still quite foreign to us.”
his PhD thesis on pharmacology. At the
same time, his mother was on blood-pres-
(Source: http://www.balancingact-africa.com/news/back/bal-
sure medication, but frequently forgot to
ancing-act_241.html)
take it. Dr. Green began sending his
mother text messages reminding her to

24 Promoting Private Sector Investment and Innovation

Understanding Demand Patterns For ICT In Developing Countries

Is it sometimes difficult to read messages on your phone ?

take her medication, and he quickly saw
the link between his mother’s non-compli-
100
ance and that of tuberculosis patients. A 9%
90
simple calculation of the number of tuber- 91%
80
culosis patients in South Africa multiplied
70
by the mobile telephone penetration rate
60
convinced Dr. Green that if he could pur-
50
chase SMSs in bulk, he could make a great
40
deal of money.
He formed his company, The On-Cue 30

Compliance Service, and approached a 20

clinic in Cape Town about using his serv- 10

ice. As they already had patients, there 0

was a ready population of potential “cus- No Yes

tomers,” which he further refined using a Source: SIMpill Patient Survey

survey questionnaire which asked ques-
tions about patients’ medication habits and
mobile phone usage. The survey results
were aggregated and the service was tai-
lored accordingly for a pilot project.
The results of the survey convinced Dr.
Green that SMS technology was an
appropriate solution to the problem of
non-compliance. Mobile phone owner-
ship rates were sufficiently high, mobile
coverage was adequate, and patients had
no trouble keeping their phones charged.
In addition, patients did not worry about
privacy issues.
Cobus Potgieter of MoPay had a back-
ground in finance and wrote his thesis on
e-commerce. Realizing that many
Africans were already familiar with
mobile phones, and that personal com-
puters would not achieve the level of pen-
etration that mobile phones enjoyed for
quite some time, Potgieter decided to
focus on value-added services on the
GSM network. For him, it was as simple
as looking around him to see the vast
numbers (an estimated 71 percent) of
South Africans without access to bank
accounts or debit cards. In addition,
banks and telecom operators were reluc-
tant to offer this service, since mobile
banking did not mesh with the core com-
petencies of either industry.
information on demand, rather than
passively receiving information as with
a radio broadcast, and could demand
specific information, such as land titles.
These examples suggest a few key steps
in assessing demand for ICT services.
These steps apply in any market, but are
especially important in a market such as
SSA where consumers’ ability to pay is
constrained.
Suggestions for how better to assess demand
for ICTs in developing countries
In his book “The Fortune at the Bottom of
the Pyramid: Eradicating Poverty through
Profits,”12 C.K. Prahalad outlines several
important considerations when market-
ing to poorer customers. Many of Praha-
lad’s suggestions focus on tailoring the
product or service to the local environ-
Do you ever get poor cell phone reception in the place wher you
normally receive your SMS from the clinic ?
5%
100
90 95%
80
70
60

Daniel Annerose of Manobi met with 50

fishing unions and telecom operators in 40

order to identify what unmet information 30

needs existed among one of the domi- 20

nant industries in Senegal. As the proj- 10
ect developed however, Manobi saw that 0
the real benefit of this communication No Yes

technology was the possibility of two-way Source: SIMpill Patient Survey

communication. Consumers could “pull”

Promoting Private Sector Investment and Innovation 25


ment. “Local environment” refers not
only to the actual product or service
itself, but also to language localization and
constraints imposed by e.g. intermittent
or non-existent power sources. Prahalad
also stresses the importance of scalabil-
ity and scope. Since “bottom of the pyra-
mid” (BOP) markets are large, solutions
that are developed must be scalable, and
developers must focus on the whole “plat-
form,” designing products or services
that can easily incorporate new features
as circumstances warrant. Additionally,
developers must be prepared to educate
consumers on usage, in effect creating
demand. Above all, developers must
focus on the price performance of their
products at every step in the value chain:
“Process innovations are just as critical in
BOP markets as product innovations.”
With respect to information and commu-
nication technologies, below are some
guidelines for assessing demand:
1. Assume that information is a positive
good, i.e. more is better
Perhaps a better formulation is that
increased access to information is a
positive good.
2. Look for situations where information
asymmetries exist
A good place to begin a search for
information asymmetries is any mar-
ket where prices are disproportion-
ately high (or low) relative to other,
comparable markets. This implies
that the price reflects more than sim-
ply factors of production such as
labor, factory resources, etc., and that
there is an information premium (or
discount) bundled into the price.
3. Do technologies exist which can address
this asymmetry?
Since the 1990s, there has been a
veritable explosion of technolo-
gies for lowering the cost of infor-
mation. Low per-consumer rev-
enues in SSA provide disincen-
tives for reinventing the wheel;
indeed, most of the cost-efficiencies
available through ICTs are due to
the implicit subsidy flowing from
the developed world to the devel-
oping world that results from rich-
26 Promoting Private Sector Investment and Innovation
Understanding Demand Patterns For ICT In Developing Countries
er countries conducting ICT
research and development.
4. Are they available in this market?
If not, one should determine why.
Are these technologies illegal, or
counter to accepted social or cultur-
al norms? Are import tariffs prohib-
itively high?
5. Are there any localization issues that
preclude use of the technology?
Localization issues include such
items as power supply and lan-
guage. Many issues of localization
can be overcome through intimate
knowledge of the market. For exam-
ple, low- and solar-powered comput-
ing might be appropriate in much of
Africa, and many open-source appli-
cations have been translated into
local languages. Other examples of
localizing applications include more
frequent writing of data to disk in
areas where electricity is frequent-
ly interrupted, and store-and-for-
ward email servers where Internet
access is not “always-on.”
6. Does the infrastructure (network, phys-
ical, human) exist to support this serv-
ice delivery?
Without employees to provide
your service or a network upon
which to deliver your service,
one is only adding to costs,
although such situations can also
provide opportunities for vertical
integration. For example, Manobi
could train fishermen in the use
of its market price service, who in
turn can become marketers of the
service. Similarly, Pésinet can
educate mothers in the benefits of
its service, and these mothers can
themselves become Agents de
Pesée.
7. Estimate opportunity costs: is this the
lowest-cost service delivery channel?
If this is not the lowest-cost method
of service delivery, market share is
not sustainable. All you are doing is
creating demand for a service that
an imitator with a lower cost struc-
ture can exploit.
Understanding Demand Patterns For ICT In Developing Countries
8. Ensure that the service meets the inter-
ests of all stakeholders
If any one of the stakeholders does
not feel that the proposed service
meets with his needs, this creates an
impediment to growth and success.
9. VRIO Analysis: Is this service
• Valued? Does this ICT Application
truly lower the cost of information
relative to all other forms of infor-
mation and communication tech-
nologies?
• Rare? Is this a new or little-
exploited delivery channel?
• Inimitable: i.e. difficult or impos-
sible to duplicate?
• Organized? (See number 6 above)
Conclusion
Prahalad has identified four elements as
key to a thriving market: creating buy-
ing power, shaping aspirations, improv-
ing access, and tailoring local solutions.
Each of these stresses the importance of
providing what the customer wants in
quantities he wants and can afford.
Another implication of these four ele-
ments is the notion that low-ARPU cus-
tomers will not remain low-ARPU cus-
tomers. By building infrastructure now,
network operators are investing in future
demand for information and communi-
cation technologies.
A final word of caution is in order, how-
ever. A recent survey by DFID found that
consumers’ views on the value of mobile
telephony varied with income level.
consumers’ views on the value of mobile
telephony varied with income level.
While the richest consumers saw that the
telephone had high economic value, the
poorest consumers saw telephony as
merely a luxury, a cost-creating method
of social networking. Value-added serv-
ices such as Manobi are helpful in
reversing this impression among the
poor, but other value-added services
are necessary in order to convince poor
consumers that mobile telephony can
lower overall costs (by avoiding the
need for travel, for example) instead of
adding to them. As Chapter 7 will show,
network operators can, and should,
work with service providers to market
value-added services in order to stimu-
late network traffic.
1 “New Technologies for Rural Applications,” p. 77
(Final Report of ITU-D Focus Group 7)
2 “Africa: The Impact of Mobile Phones” Vodaphone
Policy Paper Series, Number 2, March 2005
(http://www.vodafone.com/assets/files/en/AIMP_
09032005.pdf), p. 3
3 Ibid, p. 7
4 Ibid, p. XX
5 “Africa: The Impact of Mobile Phones” p. 51
6 http://www.balancingact-
africa.com/news/back/balancing-act_206.html
7 “Africa: The Impact of Mobile Phones” p. 44
8 “ICT, Key to E-Payment Solution” Daily Champion
(Lagos) July 28, 2005
9
http://allafrica.com/stories/200507280049.html
10
“Africa: The Impact of Mobile Phones” p. 46
11
Ibid. p. 47
12
Prahalad, C.K., “Fortune at the Bottom of the Pyra-
mid, The: Eradicating Poverty Through Profits”
13
“The Economic Impact of Telecommunications on
Rural Livelihoods and Poverty Reduction: a study of
rural communities in India (Gujarat), Mozambique,
and Tanzania”
Promoting Private Sector Investment and Innovation 27
 Chapter 3: The Challenges of Serving Rural Areas
Giving access to rural areas: technical constraints
Developing access in rural areas is a crit-
ical and strategic challenge for policy
makers of developing countries, since
telecom operators have historically spent
their efforts on urban areas. Numerous
technical options enable telecom suppli-
ers to provide ICT services to rural
areas, nevertheless access and core net-
works have to be considered together
when focusing on rural connectivity.
In effect, there are technological require-
ments to consider before focusing on
access, which is just a part of the infra-
structure roll-out. In fact, the quality and
relevance of the technology chosen for
the provision of access to rural areas will
be influenced by other network consid-
erations like existing backbones, quali-
ty of core network infrastructure, suffi-
cient number of Internet Exchange Points
(IXP), backhauling options depending on
existing telecom infrastructure and core
network issues must be considered con-
currently when focusing on rural connec-
tivity.
The access issue
Fostering ICT development in rural areas
of sub-Saharan Africa is a great challenge,
and the bundle of chosen solutions should
be cost-efficient to allow Total Cost of Own-
ership reduction for telecom operators
while also guaranteeing profits. There is
no unique model designed to fit operators’
constraints. Several factors influence the
choice of access technologies for a target-
ed rural area, each region and country
Basic Overview of a mobile Network
Mobile Phones Radio Access
Source: Alcatel
28 Promoting Private Sector Investment and Innovation
having different characteristics, physical
constraints and existing infrastructure.
Core network issues
Today, most networks are designed to
provide services relating to a specific
application:
• Public Switched Telephone Networks
(PSTN) were originally designed to carry
voice communication applications.
• Data networks, such as Internet Protocol
(IP) networks, provide Internet services like
access to the World Wide Web (WWW) and
e-mail.
• Mobile networks provide mobile communi-
cation applications.
• Cable networks were initially developed to
offer television distribution services, and
now deliver Internet access and voice serv-
ices at reasonable cost.
Existing telecom operators wishing to
provide access to rural areas will often
build on their existing core network
infrastructure. If they want to maintain
quality of service and attract new cus-
tomers, they have to upgrade their exist-
ing infrastructure (hardware and soft-
ware) to efficiently manage and absorb
an increasing customer base with its
associated voice and data traffic. When
investing in rural infrastructure projects,
most service providers do not pay
enough attention to the notion of quali-
ty of service continuation, as they try to
optimize their revenues to absorb initial
investments (CAPEX) and operational
Transmission Core Network Applications
The Challenges of Serving Rural Areas

WHO ARE THE BACKBONE CARRIERS?

expenditures (OPEX), to achieve faster
return on investment (ROI).
Backbone carriers are those long-distance transport providers
whose fiber networks span national or continental bound-
Transmission
aries or even the entire globe, providing the core combined
In a telecommunications network, trans-
infrastructure that forms the foundation for all global com-
mission is the transfer of information
munication.
from one network point to another. The
Together with local data carriers, to which they supply band-
medium used may be copper cables, opti-
width and connectivity, backbone carriers offer the interna-
cal fibers, or radio relays. Optical fiber
tional capacity and connectivity that enable ubiquitous access
and microwave may be found in urban
to Internet content.
areas, while microwave and satellite
The majority of backbone service providers offer wholesale
may be found in rural areas.
access services to other service providers. These services can
Backhauling technology, which can be
take the form of direct connections to the edge
terrestrial (radio or cable) or non-terres-
routers/switches of their backbone network (dedicated Inter-
trial (satellite), enables voice and data
net access services). They can also be offered as rented- or
services to be transmitted between core
leased-access server ports for backbone providers whose
and access networks, while an access
reach spans to an access PoP (point of presence). Backbones
technology enables end-users with a
service providers have PoPs in various strategic locations and
CPE (Customer Premises Equipment) to
high-speed connectivity to an Internet backbone. They may
connect to the network via an access
use the existing infrastructure of railways, pipelines or power
point (BTS, WiFi hotspot, etc.), also
networks when deploying cables (in the case of optical fiber),
known as last-mile technology.
to reduce civil works costs and rapidly build the network.
Backbones ensure voice and data trans-
Thus core network owners, including backbone service
mission between national and interna-
providers (BSPs), Internet service providers (ISPs) and
tional networks. The backhauling issue
incumbent local exchange carriers (ILECs) are the infrastruc-
is a major constraint for ICT infrastruc-
ture providers that typically offer transport and enhanced
ture roll-out in rural areas, due to the
data services. They often interconnect terrestrial networks
long distance between the core network
with submarine networks, and sometimes own a worldwide
infrastructure, normally located in an
backbone infrastructure. Each backbone owner can offer a
urban area, and local access points.
wide range of transport services and more.
Carriers must be prepared to enhance backbone networks
The importance of backbones
to provide global connectivity for growing volumes of traf-
A national backbone network is the infra-
fic and demand for bandwidth, while guaranteeing service
structure needed to allow broadband
availability and quality.
access to basic telecommunications and
advanced value-added services for fixed

From Core to Access

MSC
BACKHAUL BACKBONE
Access Network Core Network
BSC
RNC
IP/MPLS
SGSN
Access Aggregation GGSN
Network Transport

Base Network
ATM/MPLS
Station
Point of Presence Point of Presence
EDGE CORE EDGE
SWITCHES SWITCHES SWITCHES

Mobile Transport is a key challenge for operators

25% of total Mobile Network cost is Transport, of which 75% is Backhaul

ATM: Asynchronous Transfer Mode MPLS: Multi Protocol Label Switching

BSC: Base Station Controller MSC: Mobile Switching Center
IP: Internet Protocol RNC: Radio Network Controller
Source: Alcatel GGSN: Gateway GPRS Support Node SGSN: Serving GPRS Support Node

Promoting Private Sector Investment and Innovation 29


and mobile telecom operators and ISPs.
National backbones offer cost-efficient
access opportunities for intra-country
communication and data exchange, rather
than leasing foreign or external facilities.
Long-term return on investment on such
projects requires some sort of public
support, consisting of regulatory improve-
ments and financing options. Public-pri-
vate partnerships (PPP) involving govern-
ments and private players could then be
considered to ensure financing of these
national backbone networks.
National backbone development is cru-
cial to ensure rural connectivity. There
are still many SSA countries that lack a
national backbone network, relying on
other countries for connectivity. This
results in high service delivery costs and
limited opportunities for scalability.
How to ensure backhauling
There are different ways to ensure back-
hauling in rural and remote areas.
Depending on the distance between core
and access facilities, and the density of
the target population, it is possible to
choose between wired, radio and satel-
lite backhauling solutions.
Wired backhauling may be not appropri-
ate for rural coverage due to heavy
CAPEX costs. However, radio technologies
and satellite-enabled applications will
have an impact on the costs and time
required to extend the network, with a
decrease in CAPEX thanks to reduced civil
works and engineering, but increased
OPEX especially for satellite. Costs can be
particularly high in remote rural areas.
Operator constraints
There are different parameters that
make rural and remote areas less attrac-
tive than urban ones for telecom opera-
tors, mainly to do with costs and rev-
enues.
Complex environment
Rural areas are often harder to serve due
to harsh environments and physical
remoteness. This makes civil works and
engineering harder to manage, generat-
ing additional costs and longer time
schedules for infrastructure rollout. The
climate in SSA also affects equipment
design; high temperatures can affect the
30 Promoting Private Sector Investment and Innovation
The Challenges of Serving Rural Areas
efficiency of equipment. Theft and van-
dalism are threats when installing hard-
ware on isolated sites; it is sometimes
necessary to secure sites with dedicated
security staff, adding further costs.
Lack of infrastructure
Rural populations often lack basic infra-
structure in terms of housing, public
services (health, schools, post offices), cop-
per equipment (fixed telephone lines), per-
manent power supply, roads, etc. These
shortages make investment less attractive
and complicate infrastructure roll-out.
Human capability
Human capability is also a constraint, as
most potential users do not know how to
use new technologies, and need to be
educated to do so. Illiteracy is high in
developing countries, especially in rural
areas of SSA. A local workforce able to
install and maintain the network is also
of great importance; however, this skilled
labor is hard to find and to keep, due to
high turnover.
High entry costs
The consequence of these constraints is
high entry costs due to long distances,
AN ACCESS SOLUTION TO HELP BRIDGE THE DIGITAL DIVIDE IN THE
HIMALAYAS
In December 2004, Bhutan rolled out its plan for a rural telecom-
munications network. The challenges facing this country, situated
in the high mountains of the Himalayas, were substantial. Among
the 201 administrative counties, only 79 are connected to a telecom-
munication network. The high mountains preclude cables as an
alternative, so a turnkey network solution was chosen to provide
rural areas with voice and data, based on microwave radio and wire-
less voice-over-IP. Each subscriber will be equipped with a solar cell,
a telephone set and a small antenna able to receive data from a
central radio base station in the village.
Alcatel will implement this project before the end of 2006, which
will see installation of equipment in the Himalayas up to 4,700
meters in altitude. Some of the sites are three or four days’ walk-
ing distance from the nearest road. Most of the sites will be pow-
ered by solar power. The backbone network will be based on
microwave links, the switching technology on an NGN softswitch,
and the access portion based on a point-to-multipoint radio sys-
tem, wireless local loop and a small-scale fixed wireless broadband
access solution with VoIP.
The Challenges of Serving Rural Areas
difficult access, and high transmission
and civil works costs. Initial invest-
ment is high, but the future upgrade
potential could be substantial, thanks to
the possibility of remote software
upgrades with the new-generation net-
works. In effect, network expansion/evo-
lution sometimes does not require cost-
ly re-engineering. The cost of acquiring
rural customers is also higher than for
urban customers, due to the need for
specific marketing campaigns and mes-
sages. However, franchising systems
can decrease entry costs, for example by
using a private local entity for cus-
tomer care, or buying bandwidth at
wholesale prices, as in the Grameen
Phone business model.
Low profitability
In terms of customer profiles, rural users
often have, for the most part, lower incomes
than their urban counterparts. The absence
of human capability could also affect prof-
its; it may take a long time to achieve full
ICT awareness and empowerment.
As a result, return on investment will
take more time than in urban areas, as
people will need to be trained and
convinced about the clear benefits of
using communication tools. Operators
must count on large volumes of sub-
scribers to compensate for the lower
spending of these low-income users,
although they can take into account
incoming call opportunities, which rep-
resent 50-60 percent of rural telepho-
ny traffic.
Low-density area
The business case is complicated by
the fact that user density is insufficient
to offset the high installation costs,
resulting in low optimization of BTS
sites in the case of mobile telephony. A
decrease in the number of BTS sites
needed to reach a certain number of
users will affect Total Cost of Ownership,
and help to reduce costs per subscriber.
Understanding the low-ARPU segment:
end user constraints
Service providers should be aware of
rural users’ ICT needs, and adapt their
distribution and marketing strategies
accordingly. The profile of potential
users, promoting the benefits of ICT, and
training in their use have to be taken into
account.
Need for low-price terminals
New generations of mobile phones devel-
oped for emerging markets are charac-
terized by innovative design in terms of
looks and functionality. The key drivers
should be low price, basic features, and
battery life. High illiteracy rates, especial-
ly in rural areas, should also be taken
into account in the design of handsets,
making appropriate use of voice recog-
nition and icons.
Prahalad and most telecom analysts
suggest, when talking about bridging the
digital divide, that the mobile phone has
more potential than the personal com-
puter: “Emerging markets will be wire-
less-centric, not PC-centric”. Still, the
potential impact of broadband Internet
access on local communities must be
considered, especially for specific appli-
cations like e-education, e-health and e-
governance, as in the five case studies
described earlier. It would therefore
make sense to give connectivity to pub-
lic facilities like schools, health centers,
and post offices.
Provide micro-financing solutions
One of the main obstacles for mobile
expansion among low-income users is
the acquisition cost of the terminal.
There are successful examples of telecom
operators (Grameen Phone/Grameen
Bank) that provided micro-financing
solutions to allow end-users or interme-
diaries to acquire a mobile phone and
maybe set up businesses.
Grameen’s Village Phone (VP) program in Bangladesh is a well-
known case illustrating how telephone service can be extended to
low-income rural dwellers. VPs are public access GSM phones that
are owned and operated by local women entrepreneurs in villages
throughout Bangladesh. Financial assistance for purchasing a GSM
phone is provided by Grameen Bank, a microfinance institution.
Once an entrepreneur has acquired a phone, she can then offer
mobile payphone service at her shop, home or at the local mar-
ket. Bulk airtime is purchased by the non-profit VP sponsor,
Grameen Telecom (GTC) at a discount from the for-profit GSM oper-
ator Grameen Phone (GP). The airtime is then resold to the VP oper-
ators at a rate significantly below retail tariffs.
Promoting Private Sector Investment and Innovation 31
 The Challenges of Serving Rural Areas

A US$ 30 HANDSET FOR EMERGING MARKETS

Considering that low-ARPU segments
Following a request to phone manufacturers from the GSM Asso-
range up to US$ 5, telecom operators
ciation to develop and supply the next ultra-low cost handset to
should provide the widest choice of
connect the unconnected in developing markets, Motorola was
micro-top-up options, such as cheaper
selected and said that it will release a US$ 30 mobile phone for
recharge cards (like Nokia’s US$ 0.5
commercial distribution in early 2006. This new generation of
recharge card with limited validity), or
mobile phone for emerging markets will still allow the supplier to
other alternatives like e-refill solutions,
make a margin, while being reliable and having an improved bat-
over-the-air payment solutions or micro
tery capacity, since users may have limited access to electricity.
vouchers. Some operators even offer
airtime-swapping options between
A $100 LAPTOP FOR CHILDREN
nations, enabling users from one coun-
MIT Media Lab is currently developing a $100 laptop, a project that
try to send credit to someone in anoth-
could revolutionize the education of the world’s children, especial-
er country.
ly in emerging countries.
By enabling users to reload their phones
The proposed $100 machine will be a Linux-based, full-color, full-
without using of physical debit or pre-
screen laptop, will use innovative power (including wind-up), and
paid cards, operators reduce production
will be able to do almost everything except store huge amounts
and distribution costs (OPEX), and can
of data. The rugged laptop will be WiFi- and cell phone-enabled,
decrease churn rate (customers switch-
and have several USB ports. Its current specifications are: 500 MHz,
ing to another network operator). Churn
1GB, 1 Megapixel.
can be also minimized with additional
services based on consumer demand.
The idea is to distribute the machine through ministries of educa-
tion willing to adopt a policy of “one laptop per child.” Initial dis-
Providing affordable value-added services
cussions have been held with China and Brazil. In addition,
Service differentiation
smaller countries will be selected for beta testing. Initial orders will
Public authorities and regulators have a
be limited to a minimum of one million units (with appropriate
strong role to play in opening competi-
financing). The preliminary schedule is to have units ready for ship-
tion and decreasing import taxes and
ment by end 2006 or early 2007.
duties on equipment and services. The
cost of telecom services often remains too
high, and not always in line with the dis-
posable income of many African commu-
nities.
Use appropriate distribution channels Operators should also be encouraged to
Reseller network offer different tariffs depending on the
Telecom operators should also develop a level of service, customer profile and con-
reseller network in rural areas to reach sumption patterns. In effect, a distinction
the widest number of potential users should be made between urban and
through phone shops, retailers, tele- rural customers, to provide the right
centers, or private intermediaries selling service to the right segment. Low-income
airtime. The use of dedicated intermedi- segments will require fewer or more
aries (individuals or community centers) basic services, and their lower level of
has the advantage of reducing customer consumption could justify a difference in
management costs for telecom operators. pricing.
This is one reason why Grameen Phone Tariff plans are fundamental to encour-
succeeded. aging consumption, and to retain cus-
tomers through promotions, discounts,
New forms of top-up and special offers. Group and family
Mobile payment schemes need to change plans for both prepaid and postpaid
to address low-income end-users. Prepaid are a strategic way to increase loyalty.
schemes extended mobile services to the Finally, the gap between pre-paid and
masses in mature markets, but the aver- post-paid communication rates should
age price of the prepaid scratch card is gen- also diminish, as the pre-paid scheme
erally too high for low-end users. Most of has become the reference model in
these customers do not have a credit card developing countries, partly due to poor
or bank account, and only a tiny sum to access and low banking service penetra-
spend on mobile communications. tion, especially in rural areas.

32 Promoting Private Sector Investment and Innovation

 The Challenges of Serving Rural Areas

INNOVATIVE E-REFILL SOLUTIONS

There are also core network-enabled fea-
tures adapted to rural use: Push to Talk
E-refill allows subscribers to pay the reseller of their choice for the
over cellular, audio messaging (alterna-
desired amount of airtime, just like buying vouchers. Upon receipt
tive to SMS), Fixed Cellular Subscriber
of cash from the subscriber, the reseller sends a payment request
(FCS), emergency warnings through
message to the prepaid system. The subscriber’s account is cred-
SMS, etc. These services should be
ited automatically, and both parties are notified that the transac-
offered with local content, and take into
tion has occurred and the latest account balance is provided in a
account the constraint of illiteracy.
text message to the subscriber.
With the region’s limited fixed-line pen-
etration effectively limiting Internet
Over the Air Refill (OTAR) solutions satisfy operators’ key refill tar-
access via traditional access methods,
gets: more revenue generation, and simple and fashionable refill
mobile technology now has the opportu-
methods for end users. Due to the heavy cost structure of standard
nity to drive Internet use.
scratch cards, mobile operators are very keen on introducing “elec-
tronic” or “over-the-air” refill capabilities (using SMS) to their sub-
Time for wireless data
scriber base. By suppressing the manufacturing and warehousing
So-called 2nd-generation services such
costs linked to physical vouchers Telcos can:
as WAP (Wireless Application Protocol)
or SMS (Short messaging service) are
- Easily increase their margin on each top-up transaction;
gaining ground. Innovative, region-spe-
- Increase revenue generation and subscriber numbers by launch-
cific applications have also helped drive
ing new marketing offers;
SMS and WAP usage: mobile banking in
- Enhance their offer by providing customers with a new and fash-
Nigeria for example, or providing elec-
ionable refill method.
tion results in Kenya. Interest in these
applications indicates a broader level of
E-vouchers enable mobile operators to launch entry-level, prepaid
demand for data services. GPRS (Gener-
packs with micro-prepaid refills dedicated to low-ARPU seg-
al Packet Radio Services) or EDGE
ments. Thanks to the E-voucher solution, some amazing market-
(Enhanced Data Rates for GSM Evolution)
ing successes have already been achieved in emerging markets.
are being launched in an increasing
number of the region’s markets, with a
In addition to E-voucher, Person to Person refill (P2P) transactions
number of other networks now
are a complementary tool enabling mobile operators to provide
GPRS/EDGE ready. With the capacity to
more flexibility to their customers in the way they use their own
provide higher-speed Internet access,
credit. This P2P facility is highly appreciated within a family or with-
GPRS/EDGE can provide an initial solu-
in a community, since credit can move from one account to anoth-
tion to the lack of Internet access in
er (e.g. between a father and his son, between two friends). It
emerging markets.
allows the unblocking of prepaid users who have reached their cred-
it limit or expiry date. It is also a way of granting small amounts
of credit to relatives, or to people who cannot afford to buy a com- PUSH TO TALK (PTT)
plete scratch card. PTT is based on the concept of two-way radio communica-
tions as implemented with walkie-talkies. The introduction
Examples of telecom operators that have implemented e-refill solu- of PTT in digital cellular mobile networks effectively allows
tions: Smart Globe and Digitel (Philippines), Airtel (India), Exelcom mobile phones to become walkie-talkies with unlimited
(Indonesia), Comvik (Vietnam). range between a closed group of subscribers. The user push-
es a button on the mobile phone to obtain the right to talk,
and immediately starts to speak, with no need to dial. The
recipient (one or many) hears the message streamed
almost immediately. There is no need to hang up; this is an
“always-on” type of feature.
Value-added services and applications
A good understanding of rural customer AUDIO SMS
needs can help in the design of value- Audio SMS provides an audio presentation of SMS. This sys-
added services and applications. This tem translates standard text SMS into speech. All kinds of SMS
could take the form of applications services can be translated (presentation of incoming num-
developed by service providers, which bers, alerting, games, etc.). The ability to receive spoken SMS
telecom operators could resell: e-bank- information offers a solution for illiterate users.
ing, e-health, e-trade, market price infor-
mation applications, etc.

Promoting Private Sector Investment and Innovation 33


Community-based applications
There are also community-based appli-
cations, which could be provided
through community intermediaries, aim-
ing at improving public services and
reducing isolation.
There are numerous cases of applica-
tions in the fields of healthcare or
education that help reduce the so-
called digital divide between urban
DEVELOPING TELEMEDICINE SOLUTIONS USING DVB-RCS
The Healthware project is designed to foster the development
of satellite-based telemedicine solutions, in particular those
using DVB-RCS technologies (digital video broadcasting -
return channel by satellite). The use of DVB-RCS technologies
guarantees broadband transmission capacity from any med-
ical facility, and opens new possibilities for highly interac-
tive applications, such as second opinions or surgical video-
assistance.
The Healthware project also addresses the issues of interop-
erability between DVB-RCS platforms, integration with
mobile and terrestrial solutions, and open standard applica-
tion and service platforms, in order to enhance the deploy-
ment and operational flexibility of these services. One focus
of the project is service quality, to ensure reliable, secure end-
to-end service.
Healthware is a three-year project led by a consortium of 19
European-based partners including the European Commis-
sion and Alcatel.
34 Promoting Private Sector Investment and Innovation
The Challenges of Serving Rural Areas
and rural areas. Digital Radiology for
example, even if it requires heavy
investment in hardware, brings
economies of scale in terms of equip-
ment and staff, while improving qual-
ity of service. It also enables public
health targets to be reached, offering
remote diagnosis services for isolated
people in rural areas.
FIXED USAGE OF WiMAX
In India, 72 percent of the population, or 750 million peo-
ple, live in rural areas. Often there is no access to basic teleph-
ony, and the Internet is unknown to many. Yet children in sep-
arate villages can share the same teacher and interact with
classmates through rural broadband wireless networks. For
e-education to work in this context, a cost-effective wireless
broadband solution is fundamental.
Rural e-education is not only a concern for developing nations.
Australia, Canada, and the US are regular users of rural edu-
cation. Wireless broadband goes beyond learning in remote
areas; it can be used to perform remote medical check-ups,
diagnoses, and assisted first aid. This type of application is
already in use in Africa, but its use has not spread, since wired
broadband is in most cases not widely available or commer-
cially viable.
 Leveraging New Technologies and Existing
Chapter 4:
Infrastructure to address ICT Needs of the Rural Poor
V
oice and data services (mainly
SMS) remain the main commu-
nication needs in emerging and
developing markets, including
sub-Saharan Africa. From an individual
end-user perspective, rural areas current-
ly offer limited opportunities for data and
high-speed, non-voice technologies. How-
ever, Internet access and enhanced value-
added services and applications (VAS)
could open further opportunities and
contribute to bridge the digital divide,
when considered at the community level.
Level of service and customer profile,
including their degree of knowledge
regarding ICT, will greatly influence the
choice of access technologies, as band-
width and mobility needs will differ from
one market to another (see figure).
There is no one-size-fits-all solution for
rural areas. Nevertheless, there are still a
few emerging trends in rural areas regard-
ing the economics of infrastructure rollout.
Wireless solutions are supposed to be
more cost-efficient than wired solutions,
due to their wide coverage and smaller
civil works requirements. Wireless solu-
tions are also quicker to deploy (fewer
technical constraints related to the envi-
ronment), saving time and money.
Another assumption is that voice service
is the primary communication need that
should be addressed, and the most like-
ly growth generator, through mobile
telephony, for telecom operators. Mobile
penetration has been successful in SSA,
especially in urban environments, and
there are still major opportunities in un-
served areas that could bring further
profits to telecom operators as their
margins and customer base in urban
markets stabilize.
Today, several technological approaches
offer mobility. Each solution or technolo-
gy has its own advantages and disadvan-
tages, with the main factor for consider-
Positioning each access technology
Fiber
Bandwidth
WLAN
802.16
VDSL
DVB-S2 WLAN TD-SCDMA
ADSL, Satellite 802.11 TDD UMTS
ADSL2plus CDMA2000 HSDPA
EV-DV
DVB-S
Cable Satellite CDMA2000
UMTS
EV-DO
EDGE
Dial-up CDMA2000
1X
GSM/GPRS
Mobility
Source: Alcatel
This figure compares different access technologies, highlighting
bandwidth and mobility capabilities. Dial-up uses a classic voice
infrastructure connection via the standard copper wire telephone
network. Fiber, DSL and cable are wired technologies offering the
highest bandwidth but are not, by nature, mobile. These tech-
nologies are suitable for data. GSM and CDMA technologies offer
mainly mobile voice and data services through 2G, but more and
more bandwidth, nomadicity and mobility is being offered with
3G and other coming technologies (WiMAX, 4G) enabling a full
package of high-end services: voice, broadband data, and multi-
media applications.
ation being the radio/access technology
deployed. In the last five to ten years, var-
ious technologies have emerged that offer
intriguing possibilities from a technical as
well as a business point of view. Two very
strong mobility enablers are now in place
at the infrastructure level, one indoor
(WLAN), and one outdoor (cellular).
Recently, IP-based wireless technology
has received a strong boost, technolog-
ically and economically (e.g., WLAN,
WiMAX, etc.). These technologies have
already found some use in commercial-
ly available off-the-shelf products (WiFi
cards, access points), which provide
relatively high data rates at low prices.
These technologies are currently evolv-
ing towards higher (broadband) data
rates, improved voice support, etc.
Promoting Private Sector Investment and Innovation 35
 Leveraging New Technologies and Existing Infrastructure To Address ICT Needs of the Rural Poor
Bringing mobile voice services into rural areas
According to Pyramid Research, the
voice-centric trend should prevail, with
86 percent of subscriber additions in
2008 (vs. 93 percent in 2004 & 2005)
being 2G-related. Operators will invest in
intermediate solutions that do not
require high CAPEX, but allow them to
build on voice services and take better
advantage of high-margin applications
such as international calling, roaming,
and SMS.
Cellular networks are the key enabler of
wide-coverage voice and data applica-
tions. Currently, 2nd-generation net-
works (GSM, cdmaOne, TDMA, and
PDC/PHS) represent more than 97 per-
cent of the mobile market. GSM, with
GPRS (General Packet Radio Service),
offers around 40 Kbit/s. An improved
version, EDGE (Enhanced Data rate for
Global Evolution), triples the GPRS band-
width. CdmaOne (IS-95B) allows data
rates of up to 64 Kbit/s.
Solutions for rural areas
Effective solutions and cost-efficient
models for rural areas are presented in
the chapter “Designing Sustainable Busi-
ness Models for Rural Network Opera-
tors”. The “rural area” is where current
mobile coverage is insufficient, such as
the countryside, highways and beauty
spots. The challenge is to provide this
coverage at a reasonable cost.
GSM 2G and CDMA 450 are the two lead-
ing mobile telephony standards capable
of delivering services to rural users,
enabling voice and data for individual
usage as well as Internet access at a low
data bit rate.
GSM has been in service since 1995. It
has been adopted by the majority of
mobile telecom operators in the world,
and is recognized as the reference tech-
nology for 2G mobile telephony. One
competitive advantage of GSM is that it
has a large installed base in the world
and in developing countries, allowing
economies of scale. It remains the lead-
ing technology in Africa, offering a wide
choice of available handsets for end
users, and low entry cost for mobile
operators due to its degree of maturity.
One disadvantage is that it can be expen-
sive to install in very low-density and
36 Promoting Private Sector Investment and Innovation
Breakdown of infrastructure CAPEX by technology
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2002 2003 2004 2005 2006 2007
WCDMA
CDMA
GSM
GSM, CDMA, AND 3G
Today, some 75 percent of all mobile subscribers use GSM tech-
nology (1.8 million subscribers at the end of end 2005).
Subscriber growth in the developing markets, such as Africa,
Eastern Europe, and Southeast Asia, remains strong. Although pre-
paid subscriptions reduce the cost of customer ownership to the
operator, there is a clear trend towards lower ARPU, and it is
increasingly difficult to win new customers to help revenue
growth. Many GSM operators believe that ARPU can be increased
by providing useful or entertaining new services to existing sub-
scribers. The first such services were based on the Short
Messaging Service (SMS). GPRS is a 2.5G technology that intro-
duces new network elements for handling the packet data
streams. This solution provides much greater capacity than SMS,
and can be the basis for operators to provide more sophisticated,
value-added services. EDGE is an emerging enhancement to GPRS
that can be deployed at minimal cost by operators to provide
higher-speed data services before implementing WCDMA, or pos-
sibly as a complementary technology for suburban area coverage.
Later, the introduction of High Speed Downlink Packet Access
(HSDPA) in WCDMA will bring an 8 Mbit/s user data rate.
In recent years, CDMA has grown strongly. The worldwide increase
in CDMA subscribers exceeds 130 percent every year; today there
are over 200 million subscribers (end 2005). The CDMA2000 1x
system is being deployed in many countries to provide high-
speed data transmission, enhancing network efficiency and often
improving profitability.
3G, the third generation of mobile technologies, is a set of stan-
dards endorsed by the International Telecommunications Union
(ITU) under the name IMT2000. The primary benefit of 3G tech-
nologies is that they enable operators to offer multimedia servic-
es by providing significant capacity improvements on individual
subscriber channels and to overall cell capacities. Enhancements
to the core network also enable real-time services to be delivered
on the packet-switched infrastructure. Major advances in handset
technologies have enabled the production of multimedia-capable
terminals at reasonable prices. The 3G standards are in place, the
spectrum is available, licenses have been awarded, and the infra-
structure is ready. However, while such deployments and services
make sense in mature telecom markets or possibly cities in devel-
oping countries, they remain far from reality in rural areas.
Source: Pyramid Research
Leveraging New Technologies and Existing Infrastructure To Address ICT Needs of the Rural Poor
remote areas, partly due to the low
optimization of BTS sites.
CDMA is also a cost-efficient solution,
competing with GSM. Operating at the 450
MHz frequency, it is recognized as the eco-
nomic solution in outdoor conditions and
low-density rural areas (less than 10
percent teledensity), thanks to its unri-
valled geographical reach. In effect, its low
frequency range makes it an appropriate
technology for remote/rural areas, since
the lower the frequency band, the greater
the range. This enables economies of scale
from fewer installations (decreased
CAPEX) compared to higher-frequency
technologies. This cost-effectiveness offers
real opportunities for low-density and low
GDP-per-capita areas.
CDMA fully supports voice service, while
offering an acceptable data rate (compa-
rable to the lowest class of fixed DSL).
One disadvantage is the problem of
quality reduction when scaling up to
serve an increasing subscriber base,
especially in high-density areas. There is
a limited choice of handsets (few
providers of handsets with low features)
compared to GSM, and limited roaming
ability for public mobile service applica-
tions is another constraint of CDMA.
Bringing more than just voice to reduce the dig-
ital divide
Some telecom experts and analysts
believe that the digital divide between the
North (Western countries) and South
(developing world) is narrowing in terms
of access, especially with the fast adop-
tion and growth of mobile telephony, and
promisingly progressive Internet pene-
tration. However, there is still a real
intra-country digital divide, in terms of
the availability of ICT services in urban
Network model
1 user
Network under study
- Copper
CPE - Radio
- Satellite
1-5 km
Access
ISP: Internet Service Provider
Source: Alcatel
areas that have been addressed, and un-
served rural areas. Reducing the digital
divide is a challenging strategy for pub-
lic bodies and private investors, if we
consider that ICT could be used as a tool
for development.
The diffusion of value-added services
(Internet-enabled) and applications can
affect daily life and offer new opportuni-
ties to individuals. In addition, consider-
ing the financial constraints of rural
users, many relevant applications using
wireless broadband Internet access tech-
nologies (satellite, WiFi, WiMAX) can be
introduced for collective use, bringing
connectivity to communities through
schools, health centers, telecenters, etc.
This has the advantage of raising ICT
awareness and use, offering a way
around the lack of infrastructure and
public services in rural and remote
areas.
We are also increasingly seeing a need
for networks and access methods capa-
ble of supporting bandwidth-hungry
applications requiring broadband con-
nectivity. The market, especially in
mature telecom arenas, is evolving
towards the use of more and more IP
applications, partly because reliable and
cost-efficient broadband access tech-
nologies are being rapidly introduced
and deployed.
Offering broadband Internet access
Broadband Internet access can be seen
a sustainable solution for rural areas if
considered for shared/collective usage
(“pay as you go”). IP-based applications
offer opportunities for rural areas; the
key is to choose the right backhauling
solution and access technologies.
5-75 users 1000-10000 Operator/ISP
users
Access Aggregation
- Leased
Lines E1 - DSLAM
- WiFi - Radio - Ethernet LD - Fiber ISP
- DSLAM - Satellite switch PoP PoP
- WIP station - Fiber - Satellite
hub Internet
10-30 km (more for satellite) 100-1000 km
Backhauling Intercity Fiber Ring
PoP: Point of Presence
Promoting Private Sector Investment and Innovation 37
 Leveraging New Technologies and Existing Infrastructure To Address ICT Needs of the Rural Poor
Some would argue that the provision of
broadband access is too ambitious, since
rural users primarily need voice services,
and are insufficiently educated or interest-
ed to want Internet access. It is true that
Internet connection uptake will first appear
in urban markets. Still, the idea is that by
providing broadband Internet access, it
will be possible to offer enhanced applica-
tions that contribute to the decrease of
rural isolation and generate economic
growth. The example of Project IKON
illustrates the potential of broadband, if the
Prahalad ‘Triple A’s’ (Access, Availability,
Affordability) were realized for the non-
Bamako citizens of Mali.
Wireless vs. wired
As mentioned before, there are different
possible configurations and no ideal
solution for the provision of broadband
Internet access in rural areas. Once
again, the technology choice will rely on
many factors which could be economic
(financial constraints and market needs)
and influenced by existing infrastructure.
If no copper infrastructure exists, it is
interesting to consider wireless technolo-
gies such as satellite (especially for
remote areas) or wireless IP (WiFi,
WiMAX, etc.). It is also possible to mix
different backhauling and access tech-
nologies, depending on the environ-
ment: combining leased lines,
microwave, DSL, fiber, satellite and
wireless IP.
Wireless DSL
As a complement to either fixed DSL
lines for low-density areas, or a mobile
2G/3G network in higher-density zones,
DSL: THE DOMINANT BROADBAND ACCESS TECHNOLOGY FOR URBAN
AREAS
DSL (Digital Subscriber Line) is an access technology; but recent tri-
als have shown that it could also be used for backhauling, as an
alternative to leased lines and microwave. Copper technologies have
the advantage of being a widely-deployed technology in urban
areas. Other competitive advantages are that they are always on
line, do not tie up the phone line, could be self-installed, and are
cost-efficient thanks to inexpensive modems and competitive sub-
scription fees. The main constraint is their limited reach (up to 5km
from the central office).
38 Promoting Private Sector Investment and Innovation
new wireless solutions help to connect
consumers anytime, anywhere, at a suit-
able broadband speed.
The market dynamics for last-mile wire-
less technologies that provide broadband
connectivity to homes, businesses and
WiFi hotspots or white spots will change
significantly, as demand for high-speed
Internet increases in areas with low
population densities. This demand will
be served by the fixed operators as a
complement to their DSL services and/or
by local communities to reduce the dig-
ital divide. Mobile operators that want to
leverage their customer base and exist-
ing radio infrastructure are planning to
develop new services, such as nomadic
wireless DSL, which are not provided by
their wired competitors.
Thanks to today’s power processors,
wireless systems can provide an alterna-
tive to DSL in locations where DSL can-
not be deployed for geographic (rural
areas) or economic (lack of copper line)
reasons. Furthermore, improvements
in technology mean that these systems
are no longer fixed but offer nomadic
access today, with mobile access in the
near future.
Public WLAN offers high data rates (sev-
eral Mbit/s) in any of the 50,000 hot
spots that currently exist in places such
as airports, hotels, or conference centers.
Nevertheless WLAN, while offering clear
benefits, is limited in its coverage and
mobility capabilities for public applica-
tions. WiMAX (Worldwide Interoper-
ability for Microwave Access), in partic-
ular in its IEEE 802.16e variant, over-
comes these limitations, and can offer
broadband connectivity in extended
areas (hot zones). Thanks to state-of-the-
art radio technology, WiMAX offers
broadband wireless access at data rates
of several tens of Mbit/s over a range of
several tens of kilometers.
Standards
In the field of wireless systems, IEEE
802.11 (Wireless Fidelity or WiFi) has
exploded onto the market because of its
low cost and satisfactory performance.
IEEE 802.11a offers high data rates
and better radio resource management;
802.16 introduces still higher rates for
outdoor applications, mainly for enter-
Leveraging New Technologies and Existing Infrastructure To Address ICT Needs of the Rural Poor

WIFI: AN ALTERNATIVE FOR THE LAST-MILE CONNECTION

prise broadband access and WLAN back-
hauling. Requirements are currently
Wireless Local Area Networks (WLANs) are now expanding beyond
being defined for IEEE 802.20 mobile
their original enterprise role to provide high-speed Internet
broadband wireless access. According to
access on the move to business and high-end residential travel-
some, WiFi was brought to life by stan-
ers in hotspots such as airports, train stations, hotels and cafés. By
dardization.
adapting some of its radio capabilities (e.g. adding external anten-
Broadband Wireless Access (BWA) tech-
nas), WLAN can be used as a low-cost radio access solution in rural
nology supports the following main
areas with low population densities.
applications:
It is especially attractive to business people on the move,
enabling them to use a laptop or Personal Digital Assistant (PDA)
• Wireless DSL: DSL-like services but unwired
equipped with a WLAN card to connect to the Internet, as well as
instead of wired. The technology could be
to corporate and local web sites. In all these cases, the low band-
introduced faster than wired technology,
width/cost ratio makes WLAN an interesting value proposition for
because there is no need to modify the sub-
nomadic usage in dense and indoor areas. Thus, WLAN is an ideal
scriber line at the central office. Of course,
complement to other broadband access technologies.
the base stations should provide sufficient
WiFi is a living example of Wireless broadband access. It is grow-
population coverage.
ing fast for several reasons: it meets the connectivity needs of end-
• Backhaul for WLAN: Pushed by local coun-
users, and generates profits for service providers and infrastruc-
cils to reduce the “digital divide”, operators
ture vendors; WiFi’s success adds credibility to other BWA business
are increasingly looking to deploy WiFi tech-
models. Its steep growth rate is comparable to that of wireline DSL.
nology for broadband access in less popu-
WiFi’s evolution and key success factors are being carefully ana-
lous areas. However, even if WiFi offers an
lyzed, reproduced and improved during the development of
access solution, connection to the Point of
WiMAX
Presence (PoP) is still a bottleneck. BWA
technology offers a good solution to this
LICENSING
problem.
The WLAN frequency bands are license-exempt, which means that
• Nomadic/mobile DSL: This new concept has
the spectrum is available to any operator wishing to deploy a WLAN
been made possible by new technologies.
infrastructure without the need to deal with the regulator. WLAN
Thanks to its non-line-of-sight, zero-install
is not a truly mobile system, as it does not include the high-speed
and plug-and-play features, an anytime,
handover mechanisms associated with mobile radio access tech-
anywhere connection becomes a reality.
nologies like the General Packet Radio System (GPRS) and the Uni-
Nomadic or portable DSL provides broad-
versal Mobile Telecommunications System (UMTS). Nevertheless,
band Internet/Intranet indoor and out-
it offers limited mobility with full broadband access (making it ideal
door connectivity at any location within the
for PCs), whereas Third Generation (3G) / UMTS offers complete
coverage area.
mobility with a somewhat smaller bandwidth (making it suitable
for handsets).
Satellite: another alternative for backhaul-
ing and access in remote areas
TERMINALS FOR PUBLIC WLAN ACCESS
Satellite can provide a network with the
Any laptop PC can be endowed with WLAN connectivity by adding
ability to cover large, under-equipped
a PC card. These cards are readily available for less than US$ 50.
areas, and to immediately deploy net-
In the first half of 2003, 40 percent of the PCs sold in the United
work components for fixed and mobile
States were WiFi-enabled; by the end of 2005, it is anticipated that
telephony, as well as numerous profitable
more than 90 percent of all PCs sold in the world will be original-
applications such as TV and radio broad-
ly equipped with the WiFi communication chipset. PDAs are avail-
casting, content distribution by fixed or
able with built-in GPRS and WLAN connectivity. Such devices are
mobile multicast, and fast Internet
key success drivers for the take-off of WiFi, as they are more con-
access.
venient to use while on the move. Dual-band WiFi/GPRS cards will
This technology provides Internet access
quickly become popular PC accessories.
worldwide, and gives ISPs the freedom
to set up operations almost anywhere. It
SECURITY
will have a short-term advantage in
Deploying a secure WLAN today must include a WLAN infrastruc-
navigation and location systems, which
ture that provides strong user authentication, data privacy, inter-
will help to bridge current infrastructure
ference detection and avoidance, denial of service and intrusion
gaps in some regions. It should howev-
detection, and strong rogue access point handling features.
er be noted that broadband Internet
access would be considered first for

Promoting Private Sector Investment and Innovation 39

 Leveraging New Technologies and Existing Infrastructure To Address ICT Needs of the Rural Poor

WIMAX: THE NEXT-GENERATION WIRELESS TECHNOLOGY OFFERING BROADBAND ACCESS FOR ALL

WiMAX is a wide area network access technology whose evolution and market relevance are being managed by a group of compa-
nies forming the WiMAX forum. WiMAX stands for “Worldwide Interoperability for Microwave Access”, and is related to a telecom
standard called IEEE 802.16 and its variants.

WiMAX is the right solution to:

- extend the currently limited coverage of public WLAN (hotspots) to citywide coverage (hot zones), the same technology being usable
at home and on the move;
- blanket metropolitan areas for mobile data-centric service delivery;
- offer fixed broadband access in urban and suburban areas where copper quality is poor or unbundling difficult;
- bridge the digital divide in low-density areas where technical and economic factors make broadband deployment very challenging.

WiMAX, the natural complement to mobile and WiFi networks

Mobile networks offer full mobility, nationwide coverage for voice services, and moderate data rates. WiMAX can therefore be posi-
tioned as a complementary solution by offering higher bandwidth when required, in particular in dense urban areas. Public WLAN,
while offering clear benefits, is limited in coverage and mobility capabilities. WiMAX bypasses these limitations and offers broad-
band connectivity in larger areas (hot zones). WiFi and WiMAX solutions are also complementary, with WiFi being better adapted
for short-range, indoor connections (in particular in the enterprise and at home), and WiMAX for long-range outdoor connections.

WiMAX Spectrum and Regulation Issues

WiMAX-compliant equipment will be allowed to operate in both licensed and unlicensed bands. Most countries have already allo-
cated licensed spectrum, generally to alternate operators. Nevertheless, large quantities of spectrum are still being allocated, and
some countries have not even defined any WiMAX licensed bands yet. Geographical usage differences, and the possibility of non-
line-of-sight applications, have led the WiMAX forum to concentrate on the 2.5GHz and 3.5GHz bands, which are accessible in 90 per-
cent of the world. Some equipment providers are also targeting a 700MHz solution for use in rural deployments, even if there is no
WiMAX profile for the 700MHz spectrum at this time, but there is at least some interest within the WiMAX community to introduce
it in this frequency band. 700MHz, like CDMA 450MHz for mobile coverage in rural areas, is a very attractive spectrum band in remote
regions due to the favorable propagation conditions that exist at this lower frequency.

Opportunities for developing countries and un-served markets

WiMAX is already seen as a source of hope in the developing world. Low-cost BWA in blooming economies like India and China may
bring the benefits of economic growth to their remotest areas in the form of remote education. BWA is compelling, not only for its
practical, short-term applications, but for the long-term impact it may have on the lifestyle of millions of people and on human progress
by the dissemination of culture and knowledge. In emerging countries, the focus of broadband deployment is on urban and subur-
ban areas, and will remain so in the near future. The low quality of the copper pair prevents mass-scale DSL deployment, and fos-
ters the need for alternative broadband technologies. In this context, WiMAX is positioned as an excellent option. Moreover, the pos-
sibility of offering broadband services in combination with voice services will gradually lead to narrowband WLL substitution. Para-
meters such as availability of copper, distance to the remote unit/central office, backhauling costs, and teledensity will drive the
choice of one of these solutions.
WiMAX can provide broadband access in remote regions and developing parts of the world where basic voice or broadband access
using fixed-line service is not economically feasible. A fixed version of the WiMAX standard, 802.16-2004, can also be used to pro-
vide backhaul in cellular networks, or it can be used to significantly enhance the performance of public WiFi hot spots by increas-
ing throughput in the backhaul network, and by making it easier and more economical to deploy WiFi access points. By eliminat-
ing the need to deploy copper or fiber, an operator can significantly reduce its up-front capital expenditures, while at the same time
reducing the risk of service disruption through vandalism or theft of the buried cabling.

business users, then for the general telecommunications: broadband Internet,

consumer, possibly through communi-
ties.
Satellite access solutions offer an alter-
native to terrestrial access solutions.
Players in the telecom sector are looking
at the new opportunities for satellites
offered by the two main trends in
and next-generation, broadband mobile
networks.
Satellite technology can be used as a
complementary access solution. The com-
bination of broadband satellite solutions
with wireline and wireless solutions (DSL,
WiFi, WiMAX, GSM) can provide users

40 Promoting Private Sector Investment and Innovation

Leveraging New Technologies and Existing Infrastructure To Address ICT Needs of the Rural Poor
Connecting isolated user so public broadband networks
Connections
Backhaul
Connections
Any
Broadband
Network
WiFi
Source: Alcatel
with a terrestrial broadband connection
with the same user experience as if they
were connected to urban broadband sites.
With this objective, plus the development
of turnkey hybrid solutions, including
satellite backhaul plus DSL, WiMAX,
GSM or WiFi, this next-generation net-
work infrastructure will extend the broad-
band reach of telecom and entertainment
services to non-connected users.
Voice and data access for business
telecommunications or in isolated areas
are changing to take advantage of inex-
pensive Internet Protocol (IP) compatible
terminals. VSAT (Very Small Aperture
Terminal) applications are being replaced
by new IP applications and broadband
satellite access.
Satellite enables a wide range of appli-
cations linked to service platforms, in
fields like content distribution, cooper-
ative working, distance learning, tele-
working, remote crisis management,
credit card authorization, access to cor-
porate networks, etc. Broadband IP
access by satellite also offers a promis-
ing backhaul opportunity for the inex-
pensive connection of 2G and 2.5G
mobile base stations to the core network.
Telecom service prices in developing
regions remain higher than in their devel-
oped counterparts, thus limiting afford-
ability and ICT development. To help
reduce the digital divide, governments and
regulators are increasingly prepared to
free up satellite frequency spectrum for
broadband services. Satellite has an
User Density
Direct
Isolated
Scattered
Wireless, WiMAX,
or PLT, DSL,..
Grouped
important role in the deployment of land
mobile networks in regions with little
ground infrastructure. Since they deliver
uniform coverage over vast areas, and can
be deployed without pre-existing terres-
trial infrastructures, they are well suited
to delivering equal quality of service,
everywhere and for everyone.
RASCOM: A SATELLITE FOR AFRICA
A new satellite designed to provide coverage of the entire African
continent and parts of Europe and the Middle East, is due to enter
service in late 2006. This project is based on a satellite in geosta-
tionary orbit using the Ku and C bands. The ground networks asso-
ciated with the satellite system will include earth stations and low-
cost rural terminals, fed by solar power. The RASCOM system will
offer the capabilities required to provide fixed voice and data links,
Internet access, and broadband radio broadcasting services to the
entire African continent. It will ultimately enable almost 300,000
hitherto isolated villages to be connected. Innovative transmission
techniques, specially developed for this project, and the benefits
of economies of scale for the terminals, will enable communica-
tion services to be offered at very attractive prices, affordable by
local populations. The project owes its name to the intergovern-
mental organization RASCOM (Regional African Satellite Commu-
nication Organization), which represents the interests of 44
African operators. RASCOM is therefore the manifestation of the will
of African governments and telecommunication operators to pool
their efforts to offer the continent an infrastructure based on space
technology. This initiative is not only a global response to a set of
identified needs, but is also characterized, more specifically, by the
offer of inexpensive telecommunication services, giving sub-
stance to the desire to extend universal service in Africa. It should
also result in decreased OPEX, the same satellite being used for both
emission and reception.
Promoting Private Sector Investment and Innovation 41
 Leveraging New Technologies and Existing Infrastructure To Address ICT Needs of the Rural Poor

DVB-RCS
In effect, wireless technologies, and
satellite in particular, are well posi-
DVB-RCS (Digital Video Broadcast – Return Channel via Satellite) stan-
tioned to facilitate the rapid deploy-
dard has been defined to offer the same level of service (IP and
ment of a broadband infrastructure at
TV services) as terrestrial systems, with an identical user experi-
lower cost, even if they are still perceived
ence for people not connected via DSL. There will also soon be a
(in the case of voice and data services) as
need to consider providing support for WiMAX via satellite.
costly solutions for specific niche mar-
The main target group for DVB-RCS is broadband two-way networks
kets. In fact, the cost of satellite band-
requiring asymmetrical connectivity. This is also typically the seg-
width is seen as the limiting factor in the
ment for which, in dense urban areas, ADSL access technology is
deployment of individual satellite-based
a very suitable solution. However, due to its high cost and relative-
services.
ly short reach (ADSL runs over copper up to 4 km), ADSL is certain-
ly not the right choice for other areas.
Cost-efficient models?
DVB-RCS however is well suited as an access method for SMEs in
Broadband Internet access should not be
suburban and rural regions. When the time is right, the full poten-
considered for individual usage. While
tial user base of consumers and residents in those non-served
infrastructure roll-out could be co-
regions will become a target market.
financed by public donors to help reduce
Since applications require more and more connectivity, DVB-RCS
the digital divide and boost local
broadband access is very well placed, due to its capability to reach
economies, return on investment will
any type of population within large geographic areas.
not be as profitable as mobile voice (GSM
or CDMA), due to high CAPEX and slow

This figure compares the costs of Cost comparison of access technologies

deploying the main end-to-end solu-
Backhauling distance (km)
tions. The reference cost is that of 1 5 15 30 50 100 1000
deploying a DSL-based solution in
urban areas by a competitive operator 1
using the local loop in unbundling Micro x2
line-sharing mode (x1). The Y-axis is village E2E 2-way Satellite x4
the number of users to be served in 10
the village, while the X-axis is the
backhauling distance, roughly the dis- E2E WIMAX DSL
tance from the village to the regional Average
Urban
or DSL (WIMAX) (µWave) x4
fiber network. The reference urban 30 DSL DSL/WIMAX
DSL minimum configuration is x2.5... x3 (Satellite)
assumed to be a hundred users within Large
# connected users

average DSL reach (5 km). In equip- Village 50 DSL (Fibre-with light civil works)
ment terms, it consists of a single, Ref.
high-capacity DSLAM located close to Price x1.5... x2
the incumbent’s central office, and a 70
basic DSL modem at the customer
Relative Capital Expenditure vs. Urban ADSL
premises. If there are only a few tens
of users, this cost doubles. In small Notes: Access technology (Backhaul) Source: ALCATEL
villages (less than ten users) or scat-
tered households, the cheapest option
is the end-to-end two-way satellite solution. Although rather expensive today (about four times the cost of urban DSL), it is inde-
pendent of the backhauling distance.

There are a number of possible solutions for medium-sized villages (10-50 users). At the lower end (10-20 users), villages within
WiMAX reach (up to 15 km) can use this solution at four times the reference cost. For larger villages (20+ users), an access solution
such as DSL, WiFi or WiMAX can be suitable, maybe combined with satellite for long-distance backhaul. In the case of large villages
(50+ users), the optimal solution is DSL access. Combining DSL access with microwave (up to 30 km) and fiber backhauling can
prove to be a competitive solution for short backhauling distances, if the passive infrastructure is amortized over a long period (20
years), and the time to market is acceptable. The average end-to-end cost is 1.5-2 times the reference cost. It is interesting to
examine how the costs of these solutions are likely to change over the coming years. DSL technologies are quite mature, but cost
improvements are still achievable for remote configurations, leading to a reduction in the end-to-end cost of about 20 percent.
Local-loop unbundling costs still represent the largest portion of the DSL access cost. Radio technologies (WiFi and WiMAX) are
booming solutions with more potential for cost reductions (expected to be around 30 percent), especially for installation (line-of-
sight constraint relief) and the CPE (economies of scale). Satellite solutions are forecast to offer the largest cost reductions (mini-
mum 40 percent) thanks to technology breakthroughs in satellite bandwidth and CPE costs.

42 Promoting Private Sector Investment and Innovation

Leveraging New Technologies and Existing Infrastructure To Address ICT Needs of the Rural Poor
customer uptake offering poor revenue
opportunities. Nevertheless, its benefits
should be considered from a wider per-
spective; broadband access can con-
tribute to local development through
improved education, healthcare, and
access to information. Its impact and
return on investment would be measur-
able in the mid/long-term, helping to
slow rural exodus, bring new business
opportunities, and create new jobs, while
improving human capability.
Other technological opportunities for develop-
ing countries
The telecom industry evolves very rapid-
ly (see chart) and there are numerous
technological advancements that should
revolutionize the way people communi-
cate, bringing further opportunities for
emerging markets. IP technologies for
example should attract new business
players, especially in developing countries.
It should be observed that successful
business models in developed countries
will not necessarily adapt to developing
countries, even if leapfrogging opportu-
nities offered by technological innovation
will enable cost optimization, enhanced
quality of service and fast deployment.
Developing countries, and more pre-
cisely rural areas, firstly need basic
communication services such as voice at
lower cost. However, the evolving needs
of rural populations after ICT empower-
ment will justify future services beyond
voice, which influences initial network
design. Next-generation networks could,
Telecom evolution chart
New
Services
Adoption
Broadband
Services
Multiple new
Connectivity
Services
• Mobile Voice
• LAN
• Internet…
1995 2000
Source: Alcatel
in this context, offer a strategic advan-
tage to new entrants in terms of cost opti-
mization and future market develop-
ments.
Next-generation networks (NGNs)
NGNs take a radically different approach
than legacy networks, as they are not
designed to support any particular appli-
cation. Instead, this new network archi-
tecture offers all types of applications
through “service convergence”. With
NGNs, some services specific to a given
network can be offered through anoth-
er service network. As an example, the
open architecture of a packet network
enables it to carry voice services. Simi-
larly, mobile multimedia services will be
offered by third-generation (3G) mobile
networks and wireless access.
What is service convergence?
Service convergence means that various
subscriber services are provided by the
same telecommunication equipment, the
same terminal, the same access link, the
same transport media, the same control
element, or the same application soft-
ware. This convergence can be imple-
mented at various locations in the net-
work, or at the network edge. For exam-
ple, mobile 2G+ terminal vendors are
achieving service convergence in the
terminal. An i-Mode terminal or Smart-
phone offers both data and voice servic-
es, with the possibility of moving infor-
mation from one service to the other in
the terminal. A network server can offer
User-Centric
Broadband
Services
• Any device, any connectivity
• Single subscription & Authentication
• Consistent personalization
• Transparent synchronization
• Fixed BB (DSL) Many new services…
• Wireless BB (Wi-Fi) … but a fragmented
• Mobile BB (3G)… experience
2005 2010
Promoting Private Sector Investment and Innovation 43
 Leveraging New Technologies and Existing Infrastructure To Address ICT Needs of the Rural Poor
THE IMPACT OF AN APPROPRIATE REGULATORY FRAMEWORK
Going beyond the technological issues, deregulation has a consid-
erable influence on an operator’s mode of operation.
Through a process known as “local-loop unbundling,” government
regulators around the world are forcing incumbent operators to
open their doors to rival companies. Once inside the exchange,
these alternative carriers should be able to compete for local cus-
tomers by taking direct control over the “last mile” of copper. This
is leading to increased competition between incumbent operators,
incumbent operators operating outside their traditional regions,
and new network operators, which all want to win the most valu-
able customers with the highest spending on telecommunication
services. NGNs are well suited to supporting the network architec-
tures and business models enabled by deregulation.
1/1/2003 1/1/2004 1/1/2005
Source: : ARCEP
Impact of geographical extension of local loop unbundling in
France in the past few years
(Source: ARCEP)
Within two years, broadband access has significantly increased
thanks to local loop unbundling. The number of sites rose from
130 in 2001 to 900 in 2005, or 50 percent population coverage
compared to 11 percent in 2003.
service convergence, as is the case for
unified messaging servers. Of course,
service convergence can take place at the
network infrastructure level, for example
by using the same IP network switching
equipment to switch both data and voice.
New sources of revenues for service providers
Today, the highest revenues for net-
work operators are undoubtedly gener-
ated by voice services. However, over the
past few years, increased competition
has resulted in a gradual decline in the
profits from voice services in mature
markets. Although revenues from voice
services are still dominant, especially in
developing markets, operators are con-
fronted with supporting more call min-
utes for less profit. Especially in countries
with metered local calls, this lost revenue
was offset to some extent by revenues
from the extensive use of the PSTN for
dial-up Internet access.
As voice revenues tend to decrease fur-
ther and the trend to flat-rate Internet
44 Promoting Private Sector Investment and Innovation
access gains momentum, operators in
developed countries are looking for other
means to compensate for these losses.
Consequently, they are seeking new,
advanced services and applications that
will allow them to retain or even to
extend their customer base, and thereby
keep profits high. The most interesting
new service opportunities lie with a vari-
ety of applications integrating telephony
services, Internet data, and/or video
within the application itself. The chal-
lenge is to find new applications that add
sufficient value or convenience to justify
the additional expense in the mind of the
subscriber. NGN architectures offer the
opportunity not only to increase profit,
but also to reduce operating and invest-
ment costs. Thus, new operators are not
burdened with the need to develop a
migration strategy, as from the outset
they can opt for a converged voice and
data NGN solution to provide advanced
voice and data services.
Opportunities for sub-Saharan Africa?
Implementing an NGN enables operators
to achieve efficiencies today while ensur-
ing the future evolution of the core net-
work. Costs are reduced using low-
maintenance, small-footprint media gate-
ways. Call switching is moved closer to
the end user, thereby reducing backhaul-
ing costs. The NGN architecture supports
the management and control of widely
distributed physical ports using a single,
centralized call server, enabling opera-
tors to place switching capabilities in
areas that would have been uneconom-
ical to serve due to the high cost of build-
ing and operating a mobile switching
center (MSC) site. The result is an opti-
mized network cost and an improved
subscriber quality of service - a winning
scenario.
NGNs will bring further opportunities for
developing countries, enabling green-
field players or new entrants to distrib-
ute a wide range of value-added servic-
es and applications, while minimizing
their OPEX, thus contributing to relative
economies of scale. Fixed/mobile conver-
gence and IP-based services like VoIP
could be interesting technological evolu-
tions for emerging markets.
Telecommunication operators in develop-
Leveraging New Technologies and Existing Infrastructure To Address ICT Needs of the Rural Poor
ing countries face many challenges. One
of the biggest and most important is how
to cope with network evolution, given
today’s scenario of low available invest-
ment, uncertainty, stagnating demand,
political crises, etc. In the current state
of the market, it is difficult for an oper-
ator to justify investing in a network
migration plan. Today, many operators
face severe debt, telephone tariffs fixed
by the government, and an uncertain
political and economic future. Obtaining
investment in these conditions is almost
a “mission impossible”.
However, it is possible to help an opera-
tor create an evolutionary plan which,
based on today’s needs, defines the steps
that are needed to achieve future network
evolution. In particular, the key driver
trends on which the evolutionary plan
should be based need to be identified.
Nevertheless, few operators realize that,
in the future, NGN services will be offered
over the broadband infrastructure they
are currently deploying. This is a crucial
point that should be considered when
planning broadband deployment.
Fixed/mobile telephony
As communications services evolve, users
are increasingly faced with a confusion of
devices, subscriptions and numbers; they
are crying out for simplicity.
Many users have a fixed-line telephone at
home, a phone in the office and a mobile
phone, but most simply want just one
phone for fixed and mobile telephony
with a common directory, a common
voice mailbox and a common set of serv-
ices when at home, at work or traveling.
They do not want to have to worry about
which network is available, which tariff
they should select, or have to carry mul-
tiple devices for every eventuality.
BT BLUEPHONE PROJECT
In May 2004, a consortium of seven companies including
Alcatel was selected to launch BT’s groundbreaking “Project
Bluephone,” the first stage of BT’s fixed/mobile convergence
strategy. The pioneering attempt, set for launch in 2005, will
see BT offer customers a handset that will connect to its own
fixed-line system at home or in the office, but switch auto-
matically to Vodafone’s wireless network when on the move.
New technology combining Voice over
Internet Protocol (VoIP) and dual-mode
phones, with both cellular and WiFi
connectivity, can offer a sophisticated
service to users in a very simple and easy
to understand package. Converged
fixed/mobile solutions help protect mar-
gins by using optimized routing to the
operator’s benefit, routing calls on the
most efficient network (taking into
account the change of tariff, incremen-
tal operating expenses, and the cost
and revenue from interconnection fees).
In addition, it allows the arbitraging of
tariff distortions, for instance, generat-
ing revenue from incoming calls through
higher interconnection fees.
More importantly, combined fixed/mobile
solutions allow operators to move into
the VoIP business, making it unnecessary
for their customers to move to an alter-
native supplier. Dual-mode phones, com-
bining cellular and WiFi / Bluetooth
connectivity with VoIP, require appropri-
ate network solutions to realize their full
benefits. Depending on the targeted
users (residential or enterprise) and the
nature of the operator (fixed, mobile,
MVNO), various solutions are possible.
All these solutions are now available with
current wireless access technologies
(mostly WiFi), and will evolve to take into
account new technologies such as
WiMAX.
Internet Telephony
The IT world has deployed many comple-
mentary technologies for the networks
used to connect computers and applica-
tions: mainframes, UNIX systems, Linux
systems, PCs, Relational Database Man-
agement Systems (RDBMS), Customer
Relationship Management (CRM), etc.
Ultimately, the Internet has been adopt-
ed as the standard technology to connect
computers across networks.
The idea of the Internet is to take advan-
tage of the computing capability of the
connected systems (“host” is the gener-
ic term for a system, terminal or server
connected to the Internet), so that the
network only has to carry packets. Each
IP packet consists mainly of the address-
es of the sender and the receiver, and a
small number of bytes (typically 1500).
Host A sends the IP packets for host B to
Promoting Private Sector Investment and Innovation 45
 Leveraging New Technologies and Existing Infrastructure To Address ICT Needs of the Rural Poor

VoIP Network Architecture

Softswitch
VoIP in Access
Access
Gateway
IAD
NB Access
PSTN
BB Access Data Network

POTS/ISDN
POTS/ISDN

VoIP in Long Distance Softswitch

Trunk Trunk Local
Local
Gateway Gateway Exchange
Exchange
PSTN
PSTN
Data Network

POTS/ISDN POTS/ISDN

Source: Alcatel

the first router, which forwards it to packets, inserting index numbers to

another router, and so on, until it reach-
es B. The network carries IP packets in
an inexpensive way, using its best effort
to provide the required speed and reli-
ability. It has no memory between pack-
ets, each of which is handled separate-
ly, with the result that packets traveling
between A and B may take different
paths. No circuit is set up. If reliability is
needed, the hosts use the Transmission
Control Protocol (TCP), which creates
reliable end-to-end data streams over IP
control the order in which packets are
received, and to ensure no packets have
been lost. If there is no reliability con-
straint, the User Datagram Protocol
(UDP) is used to carry basic messages.
The network itself is only IP-aware.
As telephony is simply another Internet
application, any company, even if it is not
an access provider, can provide a teleph-
ony service. Microsoft MSN, Yahoo, AOL,
AT&T Call Vantage and Skype are
already active in this market.

46 Promoting Private Sector Investment and Innovation

Chapter 5: Understanding the Value Chain
Key players involved in the process of ICT devel-
opment
Public bodies
The role of the public sector in the high
technology content of telecom services is
supplemented by regulation policies and
standardization activities. Public bodies
have a very important role to play in the
process of ICT development, to foster
infrastructure roll-out in un-served areas
and enable universal service provision.
It has been proved that the creation of a
separate regulation authority has a pos-
itive impact on the efficiency of the tele-
com sector and can accelerate network
development.
ICT policies and strategies should target
taxation to allow telecom operators to
bring tariffs down, and open markets to
facilitate market entry for new private play-
ers. Since medium/high income consumers
are the most lucrative markets, specific
licenses and funding will need to be made
available to convince investors and private
players to go rural. Specific licensing for
under-served regions has been imple-
mented in South Africa, and is under
study in other sub-Saharan countries.
Government and public administrations
are themselves the first potential cus-
WiMAX provides new business models for operators
Applications Fixed Mobile
Wireless Complement to Incumbent
DSL ADSL in low Competition
density areas
Backhaul for In low density Incumbent
WLAN areas independancy
Nomadic/Mobile New service
DSL
Source : Alcatel
Operators can be subdivided into two groups:
- Operators interested in mobility, such as mobile operators and Wireless Internet Service Providers
(WISP), as it is a strong differentiator compared with fixed connections;
- Operators not interested in mobility, like fixed operators and local communities, whose main concern
is to provide DSL connections (wired or unwired) to the maximum number of households.
tomers; indeed, the means to access pub-
lic documents, to ease administration, to
share administration information, and to
establish connections between citizens
and the administration, are all being heav-
ily promoted by e-government initiatives.
Operators
Existing operators (telecom and ISP),
especially in SSA, have not yet invested
much in access delivery in rural and
remote areas, even if they are supposed
to do so according to Universal Service
obligations. Rural markets are often
considered risky, due to high entry costs
and smaller revenue opportunities (low
income/low population density) com-
pared to urban markets. However, real
future growth for African telecom oper-
ators will come from low-ARPU (Average
Revenue Per User)/rural markets as
high-end segments (urban/high ARPU
customers) start to saturate. By deploy-
ing infrastructure in rural areas, opera-
tors can increase their customer base
and revenues; lower margins will be off-
set by higher-volume revenues.
Services and applications providers (SAP)
SAPs design value-added services target-
Operators
WISP Local Community
Incumbent Communities Reducing
Competition "Digital Divide"
(regional)
Reducing Reducing
"Digital Divide" "Digital Divide"
New service
Promoting Private Sector Investment and Innovation 47

ing end users. Scalability of service can
be achieved if SAP establishes partner-
ships to capitalize on the distribution
channels of telecom operators. Both
service providers and operators benefit
from these new forms of agreement,
which allow them to reach a critical mass
of users. Commercial agreements
between SAPs and telecom operators are
not yet highly developed in Africa, but
could have a positive impact on the
availability and affordability of services
for end users.
End users
End users are individuals and profes-
sionals that could potentially become ICT
users if they can have access to a termi-
nal at a reasonable cost. Mobile penetra-
tion in most developing countries leaves
room for major growth, and demand will
grow as tariffs decrease, and new hand-
sets appear with design and features
adapted to the needs of low-income
users. To accelerate uptake of ICT and
its benefits (improved quality of life,
access to knowledge and information),
efforts should also be made, maybe by
public authorities, to help people to
familiarize themselves with ICT and
have access to credit.
In addition to the providers in the value
chain listed above, other stakeholders
also have a role to play.
Public facilities
Public facilities would benefit from having
access to technological innovation, which
could improve the quality of public serv-
ice, offset the lack of resources at remote
sites, and help to connect rural and urban
areas. In some cases, economies of scale
(staff and equipment/material) can also be
achieved by using new technologies rather
than traditional methods (digital radiolo-
gy for example).
Giving Internet access to rural users,
through collective or shared infrastruc-
ture (schools or telecenters), even if it will
not bring fast profits, will have a strong
impact on human capability and local
economic development.
ICT can be seen as a tool for achieving
sustainable economic growth, enhanced
public welfare, improved transparency,
and social and economic stability. Public
48 Promoting Private Sector Investment and Innovation
Understanding the Value Chain
facilities could be used to run communi-
ty information and promotion programs
on the use of ICT to develop human capa-
bility and raise empowerment, through
“cybercafés” or “telecenters” for example.
Donors
Donors can share the risks of financing
rural access, making the cost of entry less
dissuasive for telecom operators. Funding
could come from the private sector (tax on
telecom operators) and national bodies, set-
ting commitments in terms of universal
service provision, or local players interest-
ed in boosting the attractiveness of a spe-
cific region. Part of the financing could also
come from international donors: develop-
ment agencies and international organiza-
tions (United Nations, World Bank, Euro-
pean Commission, African Development
Bank, etc). Financial support could direct-
ly target end-users, helping to decrease ter-
minal acquisition costs, or indirectly,
meaning that the service provider would
benefit from the funding.
As described in the “Rural ICT Toolkit”
report from African Connection, a smart
subsidy is an initial subsidy given to the
private sector that is result-oriented, does
not distort the market, and encourages
cost minimization and market growth. It
helps to “kick-start” a project or service
delivery, using contracts that tie pay-
ments to the benefits actually delivered
to target beneficiaries.
In addition, outside funding, possibly
public, would be justified when:
• A project could make a profit but is consid-
ered only marginally viable and marginal-
ly attractive to investors in the short term,
and/or low priority, without the incentive of
a rural subsidy;
• A project will be commercially viable if high
start-up costs (capital-intensive infrastruc-
ture) are partly funded.
Women
Women should also be involved in the
value chain due to their ability to quick-
ly adopt and promote ICT. Numerous
projects involving women as key interme-
diaries have already been implemented:
to set up and run businesses (Grameen
Phone), or to develop and manage virtu-
al trade communities using Internet plat-
Understanding the Value Chain
forms. There is a need for a pro-active
approach to include women in ICT
awareness as they are sometimes exclud-
ed from using common public areas
(such as telecenters) in certain cultures.
Creating value for ICT development in under-
served areas
A new development model based on ICT
How can communication tools, like the
Internet and telephone, contribute to the
local development of communities that
are often disadvantaged by the lack of
even basic facilities, such as drinking
water, roads or electricity? Why, in this
situation, should ICT investment be not
only useful or a priority, but even eco-
nomically realistic?
Various case studies like Manobi and
Pésinet show how it is possible to devel-
op “proximity” services, that is, servic-
es that meet the basic, everyday needs of
the local economic and social organiza-
tions and the poorest people. Such serv-
ices must be defined locally, taking into
account people’s way of life, real needs
and incomes.
The model presented in the next figure
sets out ways in which ICT could con-
tribute to a lasting, integrated develop-
ment process. It is mainly based on
offering high local added-value proxim-
ity services, unlike the standard use of
the Internet in the industrialized coun-
tries. Here the term “transparent mar-
ket” refers to local trade, such as the
activities of producers and fishermen
using Manobi services for example,
New Development Model based on ICT
Demand for Telecommunication Services
Social Development
Healthcare
Education
Governance
Rural Stability
Lack of Infrastructure, Illiteracy, etc
Source: Alcatel
while the term “healthcare” highlights
the benefits of service like Pésinet,
offered by Senegal’s Saint Louis hospital
to those in the poorest areas.
This development model shows how
both local players and local residents can
achieve a genuine “leap forward” eco-
nomically, politically and socially, based
on two converging virtuous circles.
The model shows that:
• Lack of infrastructure and illiteracy are
two prime causes of sustained poverty;
access to information to take care of
oneself, feed oneself, communicate with
peers, develop projects, etc. can be a life-
line for isolated communities.
• ICT is unquestionably the most realistic
investment in communication, because of
the quicker return on investment compared
with alternative, costly infrastructures.
The Internet cannot replace the roads that
are so sadly lacking, but suitable Internet
services will make it possible to make bet-
ter use of what few means of transport are
available.
• Economically, ICT will help to create local,
more transparent marketing channels, so
limiting speculation and the risk of artificial
shortages, and improving the distribution
of margins between the various links in the
value chain of each sector, from producer
through to consumer. Time and money
saved in this way can be ploughed back into
productive new activities, helping to boost
the local economy and leading to the cre-
ation of jobs. This will, in turn, justify more
Local Economic Development
@
Affordable Transparent
Communication Market
Infrastructure
Savings in Time
Public Private and Expenses
Funding Funding
Information Needs
Job Creation
Poverty
Promoting Private Sector Investment and Innovation 49
 Understanding the Value Chain

Taking up the Challenge of the Digital Divide

communication resources, and so on.
This is the first virtuous circle.
Attract Public
• The second virtuous circle is of a social and Private Funding 3 Large scale deployments
and political nature, in which ICT can
be used as a tool to support the Economic
implementation of healthcare initia- & Social Model
tives in which information campaigns 2 Pilot projects … seed money
are so important. In the areas of edu-
cation and how society works, the
Internet has the potential to improve
1 Local experiments … encourage initiatives
communication between public
authorities and local people, as well as Source: Alcatel

between central authorities and local

authorities. It will facilitate greater trans- ment; this problem is even more critical
parency in how institutions are run, mov- in rural areas that are still very poorly
ing towards the objective of good gover- served. Thus an approach is required
nance, and offsetting the lack of transporta- based primarily on usage and services,
tion infrastructure and local government and in which the technology is not con-
presence. sidered as an end in itself but more as a
tool. There is enormous potential in
Infrastructure implementation strategy based on this area, comprising a multitude of ini-
usage tiatives based on individual competences
In developing countries, the main barri- or small creative and dynamic organiza-
er to setting up telecommunication infra- tions that can develop new proximity
structures is the lack of available invest- services. Such initiatives warrant support

ITU LAUNCHES NEW DEVELOPMENT INITIATIVE TO BRIDGE THE DIGITAL DIVIDE

In June 2005, the International Telecommunication Union launched a major new development drive designed to bring access to infor-
mation and communication technologies (ICT) to the estimated one billion people worldwide for whom making a simple telephone
call remains out of reach. Called Connect the World, the initiative is a global, multi-stakeholder effort established within the con-
text of the World Summit on the Information Society (WSIS) to encourage new projects and partnerships to bridge the digital divide.
By showcasing development efforts now underway, and by identifying areas where needs are most pressing, Connect the World will
create a critical mass that will generate the momentum needed to connect all communities by 2015. At present, ITU estimates that
around 800,000 villages (30 percent of all villages worldwide) are still without any kind of connection. Connect the World places strong
emphasis on the importance of partnerships between the public and private sectors, UN agencies and civil society. The initiative com-
prises three key building blocks (Enabling Environment, Infrastructure & Readiness, and Applications & Services) that together con-
stitute the primary areas that need to be addressed when developing concrete measures to accelerate ICT development. All Connect
the World funding partners have current development projects in one or more of these areas. They will be encouraged to develop
new partnerships and initiatives, while additional partners will be actively sought in areas not adequately covered to ensure under-
served communities get what they need where it is needed most.

At present, the 942 million people living in the world’s developed economies enjoy five times better access to fixed and mobile phone
services, nine times better access to Internet services, and own 13 times more PCs than the 85 percent of the world’s population liv-
ing in low and lower-middle income countries. But while figures do show a clear improvement over the last ten years in bridging
the gap between information “haves” and “have-nots”, they nonetheless fail to paint a true picture for many rural dwellers, whose
communities are still often unserved by any form of ICT.

This initiative has 22 funding partners, including leading corporate players such as Alcatel, Huawei, Intel, Microsoft, KDDI, Telefóni-
ca, Infosys and WorldSpace, whose CEOs have all embraced the goals of the initiative. Partners also include governments and gov-
ernment agencies including Egypt, France, Senegal and Korea, regional and international organizations including UNESCO, the Uni-
versal Postal Union (UPU), the European Commission, the International Telecommunication Satellite Organization, RASCOM and the
United Nations Fund for International Partnerships (UNFIP), as well as a range of organizations from civil society.
Source: ITU

50 Promoting Private Sector Investment and Innovation

Understanding the Value Chain
and mentoring. To this end, the public
authorities will have a key role in creat-
ing conditions that favor the lasting
emergence of such potential.
The second step is to nurture the most
promising initiatives and set up larger-
scale trials or pilot projects. This type of
project could be usefully financed by pub-
lic start-up funds, possibly in partnership
with private financing through Public-
Private Partnership (PPP) schemes.
A pilot project’s essential goal must be to
study the economic viability of the pro-
posed service platforms, if balanced
business plans are to be drawn up.
Lastly, when as many “demonstration
pieces” as possible have been set up
through the pilot projects, potential
investors (public or private) can commit
to the large-scale deployment of infra-
structures based on conventional cost-
effectiveness criteria.
The importance of Public-Private Partnerships
Diverse models can be implemented
depending on national regulation, local
community access objectives, and local
conditions. Projects include not only
operators, service providers, wholesale
operators and telecommunication suppli-
ers, but also new actors, such as civil
works and construction companies, util-
ities and financial institutions.
Public-private partnerships can generate
new types of consortia, in which these
actors may become partners or investors
in the deployment and operation of
regional or local broadband networks,
for example. Private and public partners
can share initial capital expenditures
(infrastructure, civil works) and future
revenues.
An appropriate regulatory framework
Universal Access and rural licensing
Abstract from ITU Trends in Telecommu-
nication Reform
In countries with large imbalances in
telecommunication development among
different regions, regional licensing
enables governments to target under-
served areas with specialized licenses or
more favorable treatment of rural areas.
Potential licensees in these areas may be
attracted, for example, by exclusive
licenses. Rural licenses can also be bun-
dled with licenses to provide services in
more lucrative markets. For example,
underserved counties in Uganda are
packaged into three separate “Universal
Access Regions” for licensing purposes.
Each Universal Access Region bundles
together a mix of counties with different
levels of market potential.
Bundling can also combine rural licens-
es with rights to offer more profitable
services such as international long-dis-
tance and cellular mobile services. In such
cases however, regulators should ensure
that anticompetitive cross-subsidization
does not lead to predatory pricing that
drives out of business competitors that are
licensed only to provide rural local serv-
ices. One way to avoid this is to make such
RURAL MOBILE LICENSING IN VENEZUELA
Venezuela was one of the first countries where mobile subscribers
outnumbered fixed-line subscribers. This market development,
which occurred as early as 1998, had its roots in an event that
occurred 10 years earlier, when the state-owned telecommunica-
tion company CANTV introduced the first AMPS network in the coun-
try and, in fact, in all of Latin America.
In 1991, another national AMPS license was auctioned to Telcel in
the 800 MHz band, introducing competition in the Venezuelan
telecommunication market. The licenses of both CANTV and Tel-
cel included requirements to cover the 40 largest cities (reaching
at least 100,000 subscribers) within three years after being grant-
ed. As it happened, sharp demand allowed the carriers to exceed
those mandates.
The two carriers, along with Venezuela’s fixed-line incumbent, large-
ly concentrated network construction in urban centers however, and
neglected rural areas. In a drive to establish universal service nation-
wide, the government decided to grant three new mobile service
licenses, one in each of three regions. A 1997 comparative bid
process, focusing on technical, economic, and legal criteria, award-
ed the three licenses to Digicel, Digitel and Infonet. These carriers
were allowed to provide basic residential and public telephony in
rural communities, which were defined as areas with 5,000 or fewer
people. Within their service areas, the winning bidders could pro-
vide mobile telephony, paging, private network services, data and
value-added services, satellite communications, vehicle localization,
and telemedicine. The rural carriers have expanded their networks
to cover more than 75 percent of the population in the three regions.
Source: ITU Trends in Telecommunication Reform 2004/2005
(http://www.itu.int/osg/spu/casestudies/)
Promoting Private Sector Investment and Innovation 51
 Understanding the Value Chain

SOUTH AFRICA’S “UNDER-SERVICED AREA LICENSE”

of concerns. The ability of any such car-
rier to attract large-scale capital invest-
Under the South African Telecommunications Act 103 of 1996, no
ment could be questionable. There may
entity can provide telecommunication services without a license.
be doubts about the long-term sustain-
The Act gave incumbent Telkom an exclusive license to provide pub-
ability of rural providers, given the
lic switched telecommunication services, including national long-
lower revenues they can generate in
distance service, international service, local access service and pub-
these areas. For this reason, some coun-
lic pay-telephone service.
tries have tried to start small, by focus-
In November 2001, amendments to the Act created a new license
ing their licensing approach on encour-
category, the “under-serviced area license” (USAL). The goal was
aging small and medium-sized enterpris-
to spur the growth of telecommunication services in underserved
es to enter rural markets by lowering
areas. Under the scheme, certain small and medium-sized enter-
entry barriers, compared with the
prises are allowed to apply for licenses to provide telecommuni-
process for entering urban markets.
cation services in geographic areas with a teledensity of less than
Governments can implement some
5 percent. It should be added that big operators are not allowed
options that make entry into rural and
to bid, and that the licensed operators receive some subsidies from
under-served markets more attractive to
the government or regulator.
small and medium-sized enterprises.
The USAL allows them also to offer services such as VoIP, fixed mobile
They can lower rural licensing hurdles
service, and public pay telephones. USAL licensees are neverthe-
such as non-recurring fees, and large per-
less required to transport their long-distance traffic through the trunk
formance bonds that are normally
networks of any of the national fixed and mobile operators and,
attached to licenses for the provision of
internationally, through three designated international gateway
basic telecommunication services and
licensees. The first four USALs were awarded in November 2004.
facilities. They can also relax perform-
It is important to note, however, that on 17 September 2004, the
ance mandates designed to maintain a
South African Department of Communications (DOC) awarded a sec-
high quality of service, and they can
ond national operator (SNO) license to an alliance of companies,
reduce stringent tariff requirements.
allowing them to compete with Telkom in the provision of PSTN serv-
Rural licenses for small and medium
ices. Earlier, on 2 September 2004, the DOC had issued new poli-
operators could also be subject to lower
cies aimed at accelerating the telecommunication liberalization
annual licensing fees and exempted from
process. Some services, such as public payphones, would be liber-
contributions to Universal Service funds.
alized by February 2005. The DOC also noted that it was even con-
Spectrum for the deployment of cost-
sidering removing licensing requirements for payphone operators.
effective wireless broadband technologies
could also be offered to rural licensees,
Source: ITU Trends in Telecommunication Reform 2004/2005
at reduced fees or through auctions or
DOC (http://www.doc.gov.za).
reverse auctions, in order to encourage
their deployment. In some countries,
arguments have been made for imposing
asymmetrical termination charges
between the incumbent operators and
bundling available to all rural providers. rural licensees. Such an approach would
By contrast, a licensing approach that allow rural licensees to command larg-
authorizes certain carriers to offer serv- er termination charges than they would
ice only in rural areas raises a number have to pay to the incumbent operator.

52 Promoting Private Sector Investment and Innovation

 Developing Sustainable Business Models
Chapter 6:
For Rural Network Operators
T
his chapter highlights financial
innovation and cost-reduction
strategies that may convince tele-
com operators to roll out infra-
structure profitably in rural areas, and to
exercise pressure on public policymakers
that may have previously granted license
exclusivity to one operator which is unwill-
ing to serve rural areas. As mentioned
before, telecom operators in sub-Saharan
Africa have not invested much in rural
areas, due to the heavy investments
required and low margin opportunities
compared to lucrative urban markets.
However, Universal Service provision will
soon be a commitment for telecom oper-
ators with financial support from dedicat-
ed resources (Universal Service Fund), and
new business opportunities in urban mar-
kets have started slowing down. Therefore,
it could be interesting for operators to con-
sider rural areas that have not yet been
served, and could become a mass market,
if they are well understood and addressed
with appropriate localized solutions. For
service providers, the key consideration is
how to optimize both CAPEX (capital
expenditures: all costs related to initial
investments) and OPEX (operational
expenditures: annual cost of running the
network) to boost revenues from existing
and new customers, and achieve a fast
return on investment.
Financial innovation for operators
There are different financial schemes
and innovative payment options for
operators depending on their needs,
and according to their financial capabil-
ities and strategy. Telecom equipment
and infrastructure suppliers are able to
offer customized solutions.
Innovative vendor/operator partnerships
Innovative vendor/operator partnerships
offer the possibility to develop the net-
work following traffic growth or cus-
tomer base increases, on a “pay as you
grow” basis. The operator in this case
will pay for the used capacity.
Telecom suppliers and operators can also
choose to share revenues from running
services, either for specific applications, or
for all revenues and commercial risks.
Innovative financing options
Innovative payment options are also
available that allow operators to focus on
their core business: the delivery of com-
petitive subscriber services, customer
care, marketing, branding and develop-
ment. This could be achieved with zero
CAPEX; for example, the operator can
decide to retain ownership of the net-
work and outsource running tasks to an
outside contractor: hardware operation,
software management, network opti-
mization, personnel training, etc.
Ownership can alternatively be kept by
the telecom equipment supplier (turnkey
project), with the operator purchasing
NETWORK OPERATION AND MAINTENANCE IN BRAZIL
Increasingly, operators consider technical network operation
to be a task they can outsource to partners. Outsourcing lets
them off-load non-core activities to their services partner,
reallocate resources to areas they consider key to their ongo-
ing business, and focus on their market and customers.
As well as supplying infrastructure products, telecom equip-
ment suppliers can offer services ranging from consultan-
cy, network architecture design and planning, OSS integra-
tion, network integration and deployment, to network oper-
ation, optimization and maintenance, and strong project
management capabilities.
Many organizations and telecom operators in Brazil have cho-
sen to outsource their operation and maintenance services.
Among them are Telemar, Oi, Brasil Telecom fixed and
mobile, TIM, the Presidency of the Republic, Suzano, and
Caixa Econômica Federal.
Promoting Private Sector Investment and Innovation 53

level of coverage, capacity and quality
without being involved in day-to-day
operational activities. The operator can
in this case negotiate an option to buy the
equipment. Deferred payment options
can also be agreed to support the oper-
ator in the set-up phase.
Total Cost of Ownership (TCO) reduction
Delivery of access to rural areas should
be cost-efficient, and maximize use of the
operator’s three major assets: subscriber
base, base station sites and spectrum
(licensed and unlicensed). Equipment
suppliers are now able to provide solu-
tions that fit all types of areas and their
associated constraints.
Cost-efficient solutions aim to lower the
total cost of ownership for telecom oper-
ators, making the extension of the net-
work to rural areas possible and prof-
itable if the customer base is sufficient.
The need for low-CAPEX products that
enable an operator to provide competi-
tive services (reduced CAPEX is essential
for financial reasons) is at the heart of a
significant shift in technology focus. The
ability to increase network capacity in
the future therefore depends almost
entirely on the availability of low-cost
equipment compatible with a low Aver-
age Revenue Per User (ARPU). Network
solutions based on a full product portfo-
lio are shaping the future evolution of
these markets: narrowband and broad-
band switching and highly-scalable
access nodes must be available at a very
competitive price.
Cost-reduction strategies
There are different ways of reducing
costs affecting both CAPEX and OPEX, in
other words achieving reduced network
investments and operational expenses.
CAPEX efficiency can be achieved by
preserving the initial investment, for
example re-using existing sites when a
mobile network is extended or upgrad-
ed. Network OPEX can be optimized
with new core network features such as
remote upgrade via software, reducing
maintenance costs. Power consump-
tion is another opportunity for cost
reduction. Indeed, since power require-
ments are a critical consideration in
technology selection for rural areas,
54 Promoting Private Sector Investment and Innovation
Developing Sustainable Business Models For Rural Network Operators
devices should always be designed for
minimal power consumption.
Tailored, cost-efficient solutions for rural areas
Improvements to core network, access
and backhauling solutions are constant-
ly being developed through R&D to
reduce costs. Adaptations to suit rural
applications result in the design of cost-
efficient solutions with enhanced capac-
ity and coverage.
Shared network infrastructure
Network infrastructure costs can also be
shared among several operators inter-
ested in addressing different segments
or services within the same region.
Existing operators could also resell
part of their capacities to alternative
operators (see Mobile Virtual Network
Operators).
TAILORED SOLUTIONS
Different BTS are offered to fit each type of environment: Urban,
Suburban, Rural, Isolated/Remote areas. Technical adjustments are
necessary to adapt to local constraints (power supply, climate, geog-
raphy, topography).
BTS for rural coverage are compact and their specific design (tower
and antenna) allows extended cell features (right solution for low
traffic density areas): the higher the antenna height, the higher
the cell range.
Alternative sources of power supply are also used in rural environ-
ment to combat electricity infrastructure constraints. Solar panels
allow partial BTS autonomy; efforts are currently underway to
achieve full autonomy.
Satellite backhauling can be used to reach remote areas and does
not require cellular network adaptation.
COST-REDUCTION STRATEGIES
Reducing the cost of each BTS site consists of using improved com-
ponents, and reducing the number of sites by enlarging coverage
and capacity. Telecom equipment suppliers are now able to pro-
vide radio base stations with higher capacity, reducing the num-
ber of sites by 30-40 percent. This enables distinct economies of
scale without reducing performance and quality. The use of shel-
terless sites also has the advantage of securing the base station,
which is placed up in the tower instead of on the ground. This makes
site acquisition easier, and can cut site costs by up to 40 percent.
Civil works accounts for more than 40 percent of BTS site costs,
which is why savings on site engineering are crucial. Initial invest-
ment can be partly public-funded.
Developing Sustainable Business Models For Rural Network Operators
BSS solutions for low-ARPU networks
Each specific area has its… Specific needs
Low density and Small BTS, CAPEX optimized
rural areas Minimum number of sites
Sub-urban area in Medium/large capacity BTS
tropical regions Minimum BTS site cost
Dense Urban BTS/BSC of very large capacity
Area Satisfy various subscriber class
There are various GSM Base Station Subsystem (BSS)
products and solutions that meet the requirements of
rural systems. Rural area networks are primarily charac-
terized by large coverage areas and low traffic. The most
common way to improve coverage is to increase the base
station output power to enhance the downlink signal.
However, user handsets have a limited output power.
There are enhanced solutions that meet the operators’
coverage area requirements, while also offering out-
standing output power and reception sensitivity.
Source: Alcatel
MOBILE VIRTUAL NETWORK OPERATORS (MVNO)
MVNOs represent the next trend towards mass-market
wireless services, especially in mature markets like Europe
and the Unites States. They borrow the strength of an exis-
ting consumer brand to attract customers to their service,
using the network resources of an existing wireless carrier,
becoming a service wholesaler. The best-known example of
an MVNO is Virgin Mobile, launched in the UK in 1999 (4 mil-
lion active subscribers today), and which extended its busi-
ness to the United States in 2002 (3 million subscribers by
early 2005).
MVNOs do attract customers from established telecom car-
riers, but also provide new wholesale opportunities for these
carriers, allowing them to optimize network infrastructure
by selling minutes of airtime without the costs of acquiring
these new customers. In fact, MVNOs also target consumers
who may not meet the established operators’ standards for
creditworthiness.
“The introduction by MVNO providers of low-cost wireless
access and mobile phones, along with the needs of wireless
connectivity wholesalers to make efficient use of their well-
developed network capacity and to continue to build out that
capacity, have served as drivers of the industry as it
expands towards market saturation for wireless services”
This new business model could also be used in emerging
markets, with national operators leasing or reselling minu-
tes of airtime to alternative operators interested in niche mar-
kets such as low-income users in rural areas.
Case studies
This section will draw on our previous
conclusions to show how ICT deployment
in low-income areas (rural and remote)
could be profitable if markets are well
understood and correctly addressed.
As expressed earlier, all is a question of
the availability and affordability of the
services for rural users.
GSM and WiMAX have been chosen as
access technologies, because of their
cost-efficiency and capabilities in rural
environments, allowing the fast and
efficient roll-out of voice and data serv-
ices, with sufficient bandwidth (in the
case of WiMAX) to support enhanced
applications for collective use. As dis-
cussed earlier, GSM best suits voice and
data applications (at low bit rates) and
is widely deployed in Africa. WiMAX is
a growing standard offering broadband
Internet access, and is an alternative to
wired technologies (DSL, cable, fiber),
where no copper infrastructure exists.
Calculations and assumptions are based
on Alcatel’s documentation on radio access
solutions for low-ARPU areas. We also
used data from WiMAX Forum, especial-
ly “The Business Case for fixed Wireless
Access in Emerging Markets”, June 2005.
We took the case of Mali, which is one of
the most challenging countries in SSA,
considering its current levels of GDP per
capita and mobile penetration, espe-
cially in low-density areas. Mali remains
one of the poorest countries in the
world, with 65 percent of its land area
desert or semi-desert, and with a high-
ly unequal distribution of income. About
10 percent of the population is nomadic,
and some 80 percent of the labor force
is engaged in farming and fishing.
Key figures on Mali*
• Area 1,241,000 km2
• Population: 11.5 million (2004)
• GDP (Purchasing Power Parity): US$ 11 bil-
lion (2004 est.)
• GDP per capita (PPP): US$ 900 (2004 est.)
• Literacy: total population 46.4 percent
(+15 years old), male 53.5 percent
• Population below poverty line: 64 percent
average, 30 percent of total population liv-
ing in urban areas, 70 percent of total pop- *Last data from World Bank,
ulation living in rural areas (2001 est.) ITU and CIA Fact Book
Promoting Private Sector Investment and Innovation 55
 Developing Sustainable Business Models For Rural Network Operators

Mali at a Glance

25

20

15

10

0
1997 1998 1999 2000 2001 2002 2003

Personal Computers Telephone Mainlines Mobiles Phones Source: World Bank

Map of Mali
ICT at a glance*
Western Sahara 0 200 400 km
0 200 400 mi
• Telecommunication, revenues as percent of
GDP: 2.71 ( 2002)
• Telephone mainlines in use: 56,600 (2002) Algeria
• Telephone lines per 100 inhabitants: 0.53 Taoudenni

(2002)
• Telephones (mobile cellular): 250,000
(2003) Mauritania Mali
• Internet hosts: 187 (2003) Kidal
• Internet service providers: 13 (2001)
Tombouctou
• Internet users: 25,000 (2002)
Gao
• Internet users per 100 inhabitants: 0.24
(2002) Kayes Mopti
Niger
Koulikoro Burkina
GSM business case for rural coverage Bamako Ségou Faso
We first considered a business case focus-
ing on two segments that have not been Guinea Sikasso
Benin
addressed: “low-urban” and “low-densi- Togo
Sierra Ghana
ty areas”. From the mobile operator’s per- Leone Côte d'Ivoire Nigeria
spective, these areas can be considered as
low-ARPU segments. As shown in the
table, these two segments represent about • Three users sharing one mobile
80 percent of the total population. handset/line;
• ARPU (i.e. per line): US$ 4 per month (low-
Market assumptions urban) and US$ 3 per month (low-density),
The mobile penetration assumptions with 80 percent of revenues coming from
are based on a Credit Suisse model voice and 20 percent from data (mainly
linking adoption rate with the percent- SMS);
age of mobile expenses (ARPU + hand- • Prepaid 100 percent, churn rate (annual) 10
set) by GDP/capita, as follows: percent;

Category Surface Population Average inter-village

distance

Community D < 3 inhab/km2 55% 3% 90 km

Low density areas 3 ≤ D < 15 inhab/km2 24% 22% 20 km

Low urban areas 15 ≤ D < 100 inhab/km2 19% 59% 11 km

*Last data from World Bank,

Dense Urban area 100 ≤ D inhab/km2 2% 16% NA
ITU and CIA Fact Book

56 Promoting Private Sector Investment and Innovation

Developing Sustainable Business Models For Rural Network Operators

Overview of mobile penetration evolution for the two segments

Low urban areas Low density areas

Key assumptions Key assumptions

• Population covered: 5.64 m, CAGR: 3% • Population covered: 1.24 m
• GDP/cap: USD 300, CAGR: 4% • GDP/cap: USD 150, CAGR: 4%
• Average density: 25-30 inhabitants / km2; 4-6 line/ km2 • Average density: 4.5-6 inhabitants / km2; 0.5-1 line/ km2

% %
25 25

20 20

15 15

10 10

5 5

0 0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
• One single radio network deployed, result- tribute to faster mobile adoption, like
ing in one network provider (maybe incum- decreasing tariffs and targeted value-
bent), offering possible access to Mobile Vir- added services and applications.
tual Network Operators (MVNOs);
• Handset average selling price of US$ 40 in Overview of revenues and margins
2006, decreasing by 5 percent annually; After CAPEX and OPEX assumptions, not
detailed here, we see a positive EBITDA
Overview of mobile penetration evolution for the contribution in years 2-3.
two segments
CAGR refers to combined annual growth Overview of free cash flows
rate. As shown in the figure, mobile pen- After an initial investment of US$ 141 million,
etration is expected to grow from 0 percent free cash flow break-even is reached between
to about 20 percent in low-urban areas, years two and three, with an average posi-
and from 0 percent to about 15 percent in tive contribution of US$ 50 million per year
low-density areas. As mentioned, mobile over the period. Coverage extension of low-
penetration will be influenced by growing urban & low-density areas generates an NPV
GDP/capita as well as by decreasing hand- contribution of US 11.88M over 15 years.
set costs. Other parameters can also con- Investment payback occurs in year seven.

Revenue and EBITDA (in USD Millions)

120

100

80

60

40

20

(20)

(40)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Revenue Interconnection Bad Debt Marketing, Distribution & Customer service

Network O&M Content General & Administrative EBITDA

Promoting Private Sector Investment and Innovation 57

 Developing Sustainable Business Models For Rural Network Operators

Free Cash Flow (2005-2020) (in USD Millions)

100

50

(50)

(100)

(150)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

EBITDA Capex Working Capital Variation FREE CASH FLOW

Cumulative Free Cash Flow (2005-2020) (in USD Millions)

Financial Dashboard
NPV(15% WACC) (MUSD) IRR (%) Time to: (Years) Funding (MUSD)

5 Year -107.6 5 Year -16.8 FCF Positive 1.8 2005 (YO) 140.6
10 Year -36.85 10 Year 10.0 FCF Payback 7.0 PEAK (Y2006) 146.0
Av/year until
15 Year 11.88 15 Year 16.1 NPV Payback 13.6 FCF Positive
-82.4

500

400

300

200

100

(100)

(200)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

FREE CASH FLOW CUMULATED FREE CASH FLOW

Concluding remarks case focusing on “low ARPU” segments

Overall payback is reached in seven could be improved with countries hav-
years, which is quite long compared to ing higher GDP/capita.
classic projects in urban environments. Thus, to make the business case in
Internal Rate of Return (IRR) is also far some rural and remote regions attrac-
lower than usual telecom projects, which tive for telecom operators, it would be
average 25-30 percent. However, it relevant to consider reasonable public
should be observed that the low-density intervention to decrease initial CAPEX.
segment complicates the business case,
due to insufficient subscriber density WiMAX Business Case
per BTS site (less than 500 subscribers The WiMAX business case focuses on a
over the period, vs. 1000 usually needed cluster of villages in Mali. The goal of this
to reach profitability). The business case local study is to evaluate the cost of bring-
could be improved with a focus on areas ing connectivity, in the sense of provid-
having more than 10 inhabitants/km?. ing broadband Internet access, to a rural
In addition, as described in the introduc- area already covered by GSM. By giving
tion of case studies, Mali is one of the access to rural communities, intermedi-
poorest countries of SSA. The business aries and maybe individual users, the

58 Promoting Private Sector Investment and Innovation

Developing Sustainable Business Models For Rural Network Operators

Coverged Voice/WIMAX wireless solution

End Users Traffic Voice/GSM BTS

GSM
BTS Radio Site

Abis Traffic
To WiMAX BTS
Data/WiMAX
WiMAX
GSM Core BSC BTS
IP Transport Around
15kms
Self Backhaul

Source: Alcatel

ambition is to reduce the digital divide
and contribute to local development.
WiMAX is a powerful radio access
solution that offers users broadband
wireless access at data rates of multi-
ple Mbit/s and at distances of several
kilometers, a characteristic critical for
serving people who are dispersed over
a wide geographic area where wirelines
are nonexistent.
Voice is offered through GSM, with a
capacity of around 500 subscribers per
site. Data and Internet access are offered
through WiMAX cards/modems, offering
a few shared access points with a total
capacity around 500 Kbit/s to 1 Mbit/s
(ideal for shared usage: hospital, educa-
tion, administration, cyber centers etc.).
WiMAX will offer backhaul of both GSM
and Internet traffic.
Other advantages
• Cost-efficient alternative to rural DSL;
• Shared infrastructure (part of backhauling
and antenna) with GSM;
• Easy extension of existing marketing and
services;
• Subsidies could be available for digital
divide.

Market assumptions
ASSUMPTIONS INITIAL (2006) 2016
Population 10 000 12 680
Coverage area 700 km2 700 km2
Users density About 15 inhab/km2 About 15 inhab/km2
Individual subscribers 50 1000
Public subscribers 5 6
SME subscribers 10 24
ARPU individual $5 $10
ARPU public $20 $40
ARPU SME $20 $40
Penetration rate individual (1) 0,5% 7,9%
Penetration rate public (1+2+3) 80% 100%
Penetration rate SME (1+2+3) 50% 100%

The service provider will have a 100 percent market share, and we assumed 4 percent annual churn.

Promoting Private Sector Investment and Innovation 59


CAPEX/OPEX assumptions
For such subscriber numbers, one BTS will
be enough, with a possible upgrade dur-
ing the project. We assumed that the
base station can be backhauled to the
existing core network by means of a sin-
gle long-haul, point-to-point microwave
link at a cost of US$ 15,000, requiring no
further investment in edge, core, or cen-
tral office equipment.
BTS site costs breakdown follows:
• WiMAX equipment (BTS cost)=$40K
• Backhaul=$15K
• Civil works=$10K
• Installation=$4K
• Total costs= $69K
We did not integrate any licensing fees
in the business case, assuming that the
government telecom regulator could
allocate frequencies at low or no cost,
within the context of its Universal Access
policy. We also assumed a transparent,
non-corrupt business environment, and
that there would be no marketing or
advertising campaigns.
Most of the OPEX relates to CPE (Cus-
tomer Premises Equipment) subsidies by
the operator or another sponsor, if one
chose to co-finance CPE acquisition.
Concluding remarks
The overall payback period for WiMAX
introduction is still longer than the average
for telecom projects. However, it should be
observed that this solution may be of
60 Promoting Private Sector Investment and Innovation
Developing Sustainable Business Models For Rural Network Operators
interest when connecting public facilities,
since it can be implemented to improve
community life in specific target areas.
When studying this business case, the
focus should be not only on the financial
impact from the operator’s perspective,
but also on other community benefits
that could be financed otherwise by
local authorities: improved quality of
social services (health, education),
human capability, and opportunities for
employment, trade, etc.
The logical way to build WiMAX net-
works is to start in a high-density area,
expanding over time into lower-density
areas as revenues permit. However,
decreasing terminal and CPE costs from
new technology, and improving regula-
tory frameworks (rural licensing and
appropriate frameworks for WiMAX)
will help its introduction in emerging
markets and rural areas in the near
future. As mentioned earlier, new busi-
ness models will also emerge with next-
generation networks, enabling operators
to offer combined services: voice (over IP)
and broadband Internet access at very
low prices.
Finally, rolling out WiMAX pilot projects
might identify opportunities for new
services that address pent-up demands
unforeseen in this report or by opera-
tors during the planning process. This
is exactly what we want to encourage,
and is a major point of this report. We
call this demand-led aspect of service
development “grass-roots innovation.”
Developing Sustainable Business Models For Rural Network Operators

1) Scenario without CPE subsidies

Free cash Flow Analysis for WiMAX (1)

0,2

0,15

0,1

0,05

-0,05

-0,1
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

CAPEX OPERATING COSTS Tax (35%) License Upfront Fees

Working Capital Variation FREE CASH FLOW REVENUES

Penetration rates are those indicated in the initial table (market assumptions).

WIMAX broadband: Free Cash Flow (1)

Financial Dashboard
NPV(11% WACC) (MUSD) IRR (%) Time to: (Years) Funding (MUSD)

5 Year -0.1 5 Year FCF Positive 3.0 Year 0 0.0

10 Year 0.053 10 Year 15.9 Breakeven Peak 0.1
6.7
(Payback Period) Av/year until
14 Year 0.2 15 Year 28.9 FCF Positive
0.0

0,15

0,1

0,05

-0,05

-0,1

-0,15
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

FREE CASH FLOW CUMULATED FREE CASH FLOW

Under these assumptions, payback occurs after 6.7 years.

Promoting Private Sector Investment and Innovation 61

 Developing Sustainable Business Models For Rural Network Operators

2) Scenario with 50 percent subsidy by the operator for CPE acquisition

Free cash Flow Analysis for WIMAX (2)

0,25

0,2

0,15

0,1

0,05

-0,05

-0,1

-0,15
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

CAPEX OPERATING COSTS Tax (35%) License Upfront Fees

Working Capital Variation FREE CASH FLOW REVENUES

In this case the operator subsidizes 50 percent of CPE. This increases OPEX but
has positive impacts on the penetration rate (+30 percent), bringing higher revenues.

WIMAX broadband: Free Cash Flow (2)

Financial Dashboard
NPV(11% WACC) (MUSD) IRR (%) Time to: (Years) Funding (MUSD)

5 Year -0.1 5 Year FCF Positive 4.4 Year 0 0.0

10 Year 0.056 10 Year 14.0 Peak 0.1
Breakeven 7.1 Av/year until
14 Year 0.2 15 Year 27.9 (Payback Period) FCF Positive 0.0

0,2

0,15

0,1

0,05

-0,05

-0,1

-0,15

-0,2
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

FREE CASH FLOW CUMULATED FREE CASH FLOW

Under these assumptions, payback occurs after 7.1 years.

62 Promoting Private Sector Investment and Innovation

Developing Sustainable Business Models For Rural Network Operators

3) Scenario with 50 percent CPE subsidy by the operator and 20 percent subsidy (on total proj-
ect costs) by public donor

Free cash Flow Analysis for WIMAX (3)

0,25

0,2

0,15

0,1

0,05

-0,05

-0,1

-0,15
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

CAPEX OPERATING COSTS Tax (35%) Public subsidy

Working Capital Variation FREE CASH FLOW REVENUES

Operator still subsidizes 50 percent of CPE but gets a 20 percent subsidy (on total
cost of project) from a public donor to co-finance initial BTS-related investment and
customer acquisition costs. Total project cost is about $123K. This smart subsidy
improves the penetration rate while guaranteeing faster payback for the operator.

WIMAX broadband: Free Cash Flow (3)

Financial Dashboard
NPV(11% WACC) (MUSD) IRR (%) Time to: (Years) Funding (MUSD)

5 Year -0.1 5 Year 217.3 FCF Positive 5.7 Year 0 0.0

10 Year 0.088 10 Year 22.6 Peak 0.1
Breakeven 6.4 Av/year until
14 Year 0.3 15 Year 36.3 (Payback Period) FCF Positive 0.0

0,25

0,2

0,15

0,1

0,05

-0,05

-0,1

-0,15
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

FREE CASH FLOW CUMULATED FREE CASH FLOW

Under these assumptions, payback occurs after 6.4 years.

Promoting Private Sector Investment and Innovation 63

 Making It Happen:
Chapter 7:
Enabling Environments for ICT in Sub-Saharan Africa
“In the final analysis, this exercise has proven three important points: namely, that the
headcount ICTs divide is narrowing fast; secondly, that the LDC ICTs sector is growing
and becoming profitable; and thirdly, that the market is capable of generating suffi-
cient cash flow to provide the financial resources for the expansion. This is all positive
news for the LDCs. By increasing ICTs headcount it will precipitate diffusion and
absorption levels, hence stimulating economic growth, this reducing poverty. It is now
up to governments, donor agencies, and the private sector to do their part.”
“The Application of Information and Communication Technologies in
the Least Developed Countries for Sustained Economic Growth,”
2004 Edition, p9 International Telecommunication Union

A
t the turn of the 20th centu-
ry, the world was on the cusp
of a major social change as
the result of an emerging
technology. No fewer than 500 compa-
nies had formed to produce this technol-
ogy, and early adopters had already
begun to embrace the new invention,
but it took the vision of one man to see
the market potential for it. This man
was Henry Ford, and the technology
was the automobile.
Ford is reported to have said, “There are
a lot more poor people than wealthy peo-
ple.”1 His innovation was to lower the
cost of technology relentlessly, so that it
was within reach of the mass market. In
so doing, the automobile changed from
an expensive toy for the wealthy to an
indispensable cog in the production line
of nearly everything produced today,
including leisure.
Now, at the beginning of the 21st centu-
ry, history is repeating itself. Information
and communication technologies have
changed, from a way for rich people to
communicate, to essential factors in the
production of almost every good or serv-
ice. It is generally agreed that ICTs are
a “key factor in promoting economic
growth.”2 Many of the less-developed
corners of the world have embraced
these emerging technologies and, in so
doing, have become important players in
the global supply chain, but sub-Saharan
Africa has mostly been a notable excep-
tion to this phenomenon. This chapter
will explore the policy and financial
pre-conditions necessary to facilitate
the rollout of ICT infrastructure in SSA.
It has been said that the main challenge
to the popularization of the Internet is
in fact neither illiteracy nor cost, but
lack of relevant content. Without such
content, the benefits of the Internet
remain unclear for the majority of the
population.
In addition to the paucity of content
available in local languages, the price of
access - whether to IP networks or GSM
networks - remains a constraint on
growing to scale. Without regional back-
bones and Internet exchange points,
international tariffs on traffic will remain
high.
Fortunately, there are signs of progress
in this regard. The Infinity Worldwide
Telecommunications Group of Compa-
nies (IWTGC) has announced plans to
install a second fiber-optic cable along
the west coast of Africa, to compete
directly with the current SAT-3 (South
Atlantic Telecommunications Cable No.
3) transcontinental cable. The new cable,
dubbed Project West Africa, hopes to sell
bandwidth directly to service providers,
thus lowering the cost of entry for serv-
ice providers who, in order to gain
access to the SAT-3 cable, must receive
the unanimous consent of the entire

64 Promoting Private Sector Investment and Innovation

Making It Happen: Enabling Environments for ICT in Sub-Saharan Africa
consortium. The Project West Africa
cable, expected to cost US$ 500 million,
will be financed entirely by the private
sector.3
According to Russell Southwood of Bal-
ancing Act, “Historically, the level of
international traffic has been suppressed
by high tariffs for international calls and
for Internet bandwidth. Two key con-
straints have led to this suppression of
traffic growth: monopolies over interna-
tional gateways, and limited supply lev-
els of fiber and satellite transmission
infrastructure. As the exclusivity of
incumbents over international traffic
draws to an end in at least a third of the
countries in sub-Saharan Africa, dereg-
ulation is granting new international
gateway licenses to SNOs, alternative
international operators and mobile oper-
ators.”4
Policy and Regulatory Environment
An effective policy and regulatory envi-
ronment is critical for the deployment of
ICT-enabled information and communi-
cation services in developing countries,
particularly as technologies converge.
Kenya’s Information and Communication
minister Raphael Tuju said, “ICT integra-
tion should increase competition, reduce
transaction costs, enable firms to exploit
economies of scale, enhance regional
infrastructure, and encourage Foreign
Direct Investment in the sub-sector.”5 Mr.
John Waweru, chairman of the Associ-
ation of Regulators of Information and
Communication in East and South Africa
(Aricea), has said that the search for an
ideal regulatory environment had
become more imperative given the grow-
ing digital divide between rural and
urban Africa.6
Below are several characteristics of an
effective policy and regulatory environ-
ment:
1. Set up an independent regulatory authority
The characteristics of a well-regulated
market are well known, emphasizing
transparency, accountability, due
process, and secure property rights.
Regulatory agencies should be inde-
pendent of the industry to be regulated,
and should possess the power necessary
to force incumbents to allow access to
their networks through reasonable inter-
connection fees. Without a functioning
regulatory agency to enforce contracts,
investors will continue to be reluctant to
invest in foreign infrastructure.
2. Develop national ICT policies that encourage
competition
Historically, telecommunications markets
in SSA have consisted of a state-run
monopoly. This is changing, brought
about by converging technologies such as
VoIP and WiFi, and most countries see
the benefits of competition in this sector,
but the attraction of economic rents
accruing to governments has slowed
the process. A second-order conse-
quence of emerging technologies such as
VoIP is the trend toward unified licens-
es and away from discrete licenses for
fixed, mobile and IP services. This topic
will be addressed in detail later in this
chapter.
In the past, regulation usually took the
form of capping tariff prices and telecom
operator ROI, but future regulatory
emphasis should focus on improving
access to networks. The use of Mobile
Virtual Network Operators (MVNOs)
should be encouraged. According to
Pyramid Research, a technology consul-
SOMALIA ILLUSTRATES THE BENEFITS OF COMPETITION AS WELL
AS THE NEED FOR REGULATION
In the past decade, Somalia has moved from one incumbent
telecommunication operator to five operators. As a result,
the cost per minute of an international phone call is now
“five or six times lower than most African countries.”7 In a
country with no official banking or postal system, most Soma-
lis do have access to a fixed phone line, but a lack of inter-
connection agreements means that many cannot call out-
side their network, and there is in fact over-capacity.
The UNDP reports that Hargeisa, the capital of Somaliland,
is “wreathed in coils of chaotic telephone cables snaking
along roadsides and tangling in overhead spaces.”
Fierce competition in IP networks has produced value-added
services in Somalia. Entrepreneurs have created custom soft-
ware packages to handle overseas remittances, and students
use the Internet for e-learning through universities overseas.
Promoting Private Sector Investment and Innovation 65

What is meant by Universal Access Gap?
In order to discuss a universal access gap, one must first
define terms such as “access” and “gap.” Access means
something very different in developing countries than it does
in developed countries. In the United States, with roughly
65 telephones per 100 people, approximately 94 percent of
all households have a telephone, whereas Burkina Faso has
defined its goal of universal access as having pay phones
within 20 kilometers of most people.
Furthermore, the “gap” has been broken down into two com-
ponents: a “market efficiency gap,” which refers to commer-
cially-feasible but as-yet-unmet demand; and an access gap
per se, which refers to “commercially-unfeasible” unmet
demand. It is our contention that the “commercially-unfea-
sible” portion of the access gap is smaller than previously
thought, and getting smaller still.
tancy, “MVNOs represent a tremendous
tool to drive growth further in emerging
markets.”7 However, Guy Zibi, the author
of the Pyramid study, points out that in
the less than perfectly competitive mar-
kets found in SSA, network operators
have little incentive to open their net-
works to MVNOs, often preferring to
hoard network capacity to accommodate
future demand. Only when operators are
forced to assume the full cost of their
infrastructure are they motivated to
exploit unused capacity. To provide a
viable business model, MVNOs must be
more cost-efficient than the network
operator, while at the same time offering
a differentiated service, or extending the
market into areas the operator cannot or
will not enter, such as rural areas.
3. Make universal access a priority
Universal access to ICT - particularly
telephony - is of greater concern as
markets are opened to competition.
Operators in a competitive market will
behave rationally, and first connect high-
density, largely urban, richer customers,
while ignoring rural, poorer customers.
Therefore, regulatory agencies must cre-
ate environments where operators will
* It interesting to note that rationally serve rural markets.
mobile operators facing chal-
lenges from IP networks
express the same concerns Several methods of offering incentives to
that the incumbent telecom provide universal access have been sug-
operators did when they first
faced competition from gested, including specific licenses for
mobile operators. rural areas, as tried in South Africa, and
66 Promoting Private Sector Investment and Innovation
Making It Happen: Enabling Environments for ICT in Sub-Saharan Africa
“perishable” licenses, which mandate
that if operators have not provided
access to a particular region in a given
period, then licenses for these areas will
be re-sold, perhaps through an auc-
tion. Governments have successfully and
efficiently induced network roll-out via
“reverse auctions,” whereby operators
compete to accept the lowest possible
subsidy to acquire the license.
Vodacom has protested the latest set of
competition framework changes in Africa,
stating that they were likely to be off-put-
ting to investors. The company argued for
a phased and managed approach with no
quick changes, allowing new markets to
develop.∗ Vodacom went on to say, “Price
regulation should not be seen as the met-
ric of ‘successful regulation’”. Regulators
tended to try to drive prices down by
addressing interconnection fees. Instead,
argued Vodacom, it makes sense to man-
date open access to more mobile opera-
tors (in the form of MVNOs) and let
competition do the job.8
In Connecting SSA9, the authors identi-
fied three “core pillars” of the World
Bank’s ICT strategy in SSA:
1. The Core Reform Agenda:
• Market liberalization
• Regulation
• Capacity-building
• Privatization
• Postal sector reform
2. Addressing Market Failures:
• Rural access
• National backbone
• Post-conflict countries
3. ICT for Development Applications:
• E-commerce
• E-government
• Civil society applications
The authors of this study called upon the
development community to focus on the
core reform agenda, stating that this
agenda is “the foundation for sustainable
ICT sector development and rollout of its
infrastructure... Significant evidence
exists to support the fact that liberalized
markets based on pro-competitive poli-
cies and regulatory frameworks provide
strong support for improved access.”10
Making It Happen: Enabling Environments for ICT in Sub-Saharan Africa
With respect to addressing market fail-
ures, particularly for the issue of rural
access or the establishment of a nation-
al backbone, the authors of Connecting
SSA acknowledge that some public-sec-
tor financing may be necessary, but
they also sound a cautionary note:
“It is critical, however, that public sup-
port does not distort competition in
growing ICT sectors—policy and regula-
tory interventions that can influence
market development should be explored
before public financing solutions are
applied. For instance, the introduction
of output-based aid (OBA) schemes for
rural access or backbone infrastruc-
ture development in less reformed envi-
ronments is a risky proposition, unless
it is preceded by detailed impact analy-
sis to avoid subsidizing what could oth-
erwise be commercially viable operations
if the regulatory environment was set up
correctly.”11
4. Open the spectrum for emerging technologies
The rapidly-changing business environ-
ment in which technology providers
operate highlights the policy implications
of the trend toward convergence, partic-
ularly in a country with a Universal
Access policy. Because technology
changes so rapidly, convergence dic-
tates that regulation be technology-neu-
tral in order to avoid stifling innovation.
However, technology neutrality is impos-
sible in the absence of corresponding
service neutrality. Service-limiting licens-
es are de facto technology-limiting. (The
one caveat to this statement arises if
competitors are not in fact perfect sub-
stitutes for each other, as in the case of
an infrastructure-owning telephone
incumbent and a mobile virtual net-
work operator.). The recognized need for
these two attributes - technology neutral-
ity and service neutrality - has given rise
to so-called converged licenses. Con-
verged licenses recognize that the serv-
ice offerings of operators are increasing-
ly becoming substitutes, and in fact
operate using the same finite resource,
the frequency spectrum. Such licensing
schemes bring the entire spectrum under
the jurisdiction of one regulatory agency.
Spectrum licensing schemes offer sever-
al advantages. First, by bringing the
entire usable spectrum under one regu-
latory body, issues of radio interference
can be addressed quickly and easily. Sec-
ond, operators will have clear property
rights to portions of the spectrum. Third,
single regulatory agencies frequently
permit arbitrage among license-holders,
enabling spectrum-consolidating and
wealth-creating transactions. Such con-
solidations may lead to economies of
scale, as technology providers (both
hardware and software) are able to take
advantage of greater market reach.
Fourth, a single regulatory agency can be
more efficient in negotiating conflicts at
the periphery of a regulated environ-
ment, such as with neighboring coun-
tries. Finally, with a single, converged
license based on spectrum frequency
instead of technology or service, and the
ability to re-sell unused spectrum, incen-
tives exist to utilize existing infrastruc-
Everything that rises must converge
The past decade has seen considerable convergence of infor-
mation and communication technologies. Largely the result
of increased service delivery over IP channels, convergence
manifests itself in several ways. First, the hardware itself has
converged; computers offer telephony and mobile phones
deliver data. Additionally, the service providers themselves
have combined their services; in the US, for example, Ver-
izon offers fixed-line telephony, mobile telephony, and Inter-
net access. Verizon also illustrates delivery channel conver-
gence, since fixed-line telephony and broadband Internet
access are both delivered on the same copper wires. Final-
ly, there is market convergence, which describes the
increasing substitutability of services, as Internet service
providers or value-added service providers (such as Skype)
offer services that are substitutes for traditionally unrelat-
ed services, such as fixed-line telephony.
The sources of this convergence are both hardware-and soft-
ware-driven. As broadband became increasingly affordable
for consumers in developed countries, manufacturers creat-
ed hardware to take advantage of this increased bandwidth,
and software developers did likewise, with video-conferenc-
ing applications such as Go2Meeting but one example. Anoth-
er source of convergence can be attributed to simple mar-
ket forces. As ARPUs started declining for mobile operators,
these businesses chose to diversify their service offering.
Promoting 67
 Making It Happen: Enabling Environments for ICT in Sub-Saharan Africa

Poor policies blamed for slow growth of ICT

Africa’s policy for Information and Communication Technology (ICT) has not kept pace with technological advancement, a regional
stakeholder forum heard last week. Top on the agenda of the meeting was integration of ICT policies in the region to help bridge
the digital divide. Mr. Erastus Mwencha, the Comesa Secretary General, said harmonization of ICT policies was aimed at encourag-
ing investment and fostering regional integration.

The initiative that is sponsored by the European Development Fund brought together the region’s ICT regulators. Information and
Communication minister Raphael Tuju urged participants to come up with an ICT model that fits the region’s needs.
“ICT integration should increase competition, reduce transaction costs, enable firms to exploit economies of scale, enhance region-
al infrastructure and encourage Foreign Direct Investment in the sub-sector,” he said.

Mr. John Waweru, the Director General of the Communications Commission of Kenya, said technological advancement had facilitat-
ed convergence in the ICT sub-sector, making traditional methods such as pricing telecommunication services by the minute, mile
and usage irrelevant. He gave the example of broadband technology, which uses an Internet platform for telephony.
He said that new tariff structures were needed for such services to avoid unfair competition.

Waweru, who is the chairman of the Association of Regulators of Information and Communication in East and South Africa (Aricea),
commended African governments for recognizing the role of ICT in development. In Kenya, he added, two private Global Mobile Per-
sonal Communication via Satellite (GMPCS) and five commercial Very Small Aperture Terminals (VSAT) operators have been licensed.
He said the search for an ideal regulatory environment had become more imperative given the growing digital divide between rural
and urban Africa.

Mr. Mike Jensen of Catalyzing Access to ICTs in Africa (Catia), a DFID-sponsored project, said that while 70-80 percent of the African
population lives in rural areas, 90 percent of fixed lines are in capital cities and secondary towns. “Most rural people have to travel
long distances for access to telephone and Internet services adding onto the costs,” he said. Jensen urged African governments to
eliminate the multiplicity of licenses that stand in the way of investment in the ICT sector.

Mr. Geoff Daniell, a consultant based in South Africa, urged African governments to make use of low-cost satellite systems to improve
access to ICT in the region. He allayed fears that such technological advancements posed a threat to national security.
“Wireless devices are able to detect use of military radar, and automatically drop the connection to prevent interference,” he said.

(Source: Wekesa, Bob: The East African Standard, August 3, 2005 Quoted at http://allafrica.com/stories/200508020985.html August
2, 2005)

ture efficiently, since unused capacity
carries an opportunity cost.
This has profound implications for rolling
out infrastructure to rural and other cur-
rently underserved areas. In countries
such as Mali, the incumbent telephone
operator has little incentive to re-sell its
unused capacity, and may in fact be jus-
tifying hoarding capacity, based on antic-
ipated future demand for its services.
While future needs may be a legitimate
reason to reserve capacity, this penalizes
potential customers who would be willing
to pay for services now, and there may be
MVNOs willing to service this low-ARPU
market. In a regulatory environment
where spectrum reselling is permitted,
predatory or vindictive hoarding is
reduced.
Uganda has been singled out as an
especially favorable regulatory environ-
ment. Local operators agree that
telecommunications regulation there is
“much more progressive than anywhere
else in Africa”, that the Uganda Commu-
nications Commission is “fair and equi-
table”, and that contracts and agree-
ments are generally honored. One oper-
ator commented, “I can concentrate on
growing my business, not sorting out
bureaucratic problems.”12
5. Improve access to capital
A basic goal of regulatory policy should
be to enable resources to go to their high-
est-valued use. Currently, many SSA
countries have restrictions on the per-
centage of foreign ownership in telecom

68 Promoting Private Sector Investment and Innovation

Making It Happen: Enabling Environments for ICT in Sub-Saharan Africa
operators. Such restrictions only hinder
infrastructure rollout, as it shrinks the
available capital. Similarly, taxing hand-
sets as luxury items constrains con-
sumers’ access to affordable hardware.
As demonstrated by the experience of
Project IKON and Manobi, access to
capital remains a serious constraint to
the growth of ICT infrastructure. “Large
investors have a much easier time of it
than smaller operators, which enjoy
less ready access to senior government
officials,” states Russell Southwood.13
Public-private partnerships, through
such organizations as the International
Finance Corporation (IFC) and the CDC
group (formerly the Commonwealth
Development Corporation), have had
some success in stimulating infrastruc-
ture roll-out directly by providing access
to capital, but the record is decidedly
mixed. It has been stated by some tele-
com operators that development assis-
tance is “at best a waste of time and at
worst an active impediment.”14 Uganda
Telecom, for example, has inherited a
patchwork of incompatible legacy sys-
tems, all built with donor assistance tied
to the use of particular suppliers, much
of which is now fit for nothing but
scrap. None of the highly publicized
regional government- and donor-led
infrastructure projects appears to be
making anything more than minor blips
on the radar screen. As one Tanzanian
operator says, “75 percent of assisted
projects just don’t work. If a project is
viable, it’s commercially viable and
should be done commercially.”15
6. Ease access to credit for low-income groups
One successful example of a public-pri-
vate partnership is in the creation of
micro-credit initiatives, as in the
Grameen Village Phone. Alternatively,
donor organizations could provide fund-
ing specifically for rural and un-served
areas, using an Output-Based Aid (OBA)
approach.
7. Increase human capacity
Several project managers among those
studied for this paper noted the lack of
training in ICTs at university level, and
the difficulty of finding qualified appli-
cants to service networks and to create
content. Additionally, low literacy rates
not only impede uptake of ICT services
on the demand side, but also hinder the
rollout of infrastructure and the creation
of content on the supply side. Address-
ing issues of literacy and education are
beyond the scope of this paper, but
worth mentioning.
One way in which the private sector, par-
ticularly telecom operators, could
address the issue of human capacity is
to adopt a vertical integration approach.
Operators should harness their formida-
ble marketing abilities to promote value-
added services on their networks. There
have been successful examples of this in
the United States, as network operators
sell handsets with value-added services
such as AOL’s Instant Messenger already
installed. Sonatel could try the same
approach with Manobi’s value-added
service in Senegal.
Public-private partnerships (PPPs) can
also be beneficial in improving human
capacity through investment in training
programs at university level in order to
develop demand for ICT services, as well
as in the workforce to support such
technologies. Such an approach should
also spur innovation and content creation
on the supply side, creating a virtuous
cycle in the manner first illustrated by
Jean-Baptiste Say in 1803.16 In particu-
lar, donor organizations can attempt to
redress inequalities in access to ICTs
between genders through training pro-
grams geared toward women. Finally,
donor organizations, whether through
PPPs or alone, can serve as business
incubators for value-added service
providers.
Conclusion
Policy and financial environments can
have a profound influence on the spread
of ICTs in SSA, particularly in as-yet
unserved rural regions. Regulatory policies
should focus on encouraging investment,
including foreign investment. With this
goal in mind, regulation should be technol-
ogy- and service-neutral, and should be
characterized by transparency, clarity,
fairness, and flexibility in anticipation of
future technological developments such as
VoIP and WiMAX. Regulation should also
seek to minimize the need for litigation.
Promoting Private Sector Investment and Innovation 69
 Making It Happen: Enabling Environments for ICT in Sub-Saharan Africa

Above all, enabling environments should 1

Watts, Steven, “The People’s Tycoon: Henry Ford and
seek to foster competition. It is up to each the American Century”
2
“The Application of Information and Communication
country to find the balance between pro-
Technologies in the Least Developed Countries for
tecting the property rights of license hold- Sustained Economic Growth,” International Telecom-
ers and promoting innovation in ICTs. munication Union, Edition 2004, p. 74
These issues apply to all countries, but the 3
http://www.itworld.com/Tech/4535/
potential benefit of relaxed control over the 050815transcont/
4
http://www.balancingact-
use of the spectrum is greatest in under-
africa.com/news/back/balancing-act_245.html
developed countries such as those found 5
Wekesa, Bob East African Standard, The August 3,
in sub-Saharan Africa. 2005 Posted to the http://allafrica.com/sto-
ries/200508020985.html August 2, 2005
6
Ibid.
7
“MVNOs in Emerging Markets: Developing the Busi-
ness Case for the MVNO Model” Pyramid Research
(www.pyramidresearch.com), 2005
8
http://www.balancingact-
africa.com/news/back/balancing-act_255.html
9
Connecting Sub-Saharan Africa: A World Bank Group
Strategy for Information and Communication Technol-
ogy Sector Development
10
Ibid., p. xii
11
Ibid., p. xii
12
Quoted in http://www.balancingact-
africa.com/news/back/balancing-act_66.html
13
http://www.balancingact-
africa.com/news/back/balancing-act_66.html
14
Ibid.
15
Ibid
16
Say, Jean-Baptiste A Treatise on Political Economy,
1803

70 Promoting Private Sector Investment and Innovation

Chapter 8: Going Forward
In the course of completing this study, several key themes emerged that can provide
the basis for broad guidelines to policy makers and network operators.
Infrastructure deployment in rural sub-Saharan
Africa can be profitable.
In the chapter entitled “Developing Sus-
tainable Business Models,” this paper
presented two illustrative case studies
(GSM & GSM/WiMAX) supporting this
claim. Although payback periods will be
longer in rural markets than in urban
markets, it is generally understood that
the demand for ICT is strong among the
rural poor of SSA.
Input from stakeholders at every step of the
value chain is essential.
Infrastructure rollout within rural areas
of SSA will largely be demand-driven.
Network operators need input from their
customers regarding what services they
are willing to pay for. In turn, service
providers must pay careful attention to
the needs of end users. Local experi-
ments and pilot projects financed
through public-private partnerships can
prove there is an unmet demand in
such areas. Without “buy-in” from end
users, network roll-out based solely on
technological concerns has no guarantee
of success. Operators must ensure they
are offering infrastructure in the quan-
tities and qualities consumers want and
can afford. When Manobi lobbied Sonatel
to build a tower in Kayar, for example,
the result was a larger mobile footprint
for all consumers and a large number of
subscribers added to the network.
Mature and new technologies offer a chance to
leapfrog the lack of legacy infrastructure in rural
SSA.
Mobile technology offers a chance for
sub-Saharan Africa to deploy networks
that overcome the lack of legacy fixed
telephone lines. The challenge of ensur-
ing universal access to not only telephone
services but also to the Internet can ben-
efit from new technological develop-
ments. For example, technological evo-
lutions such as packet radio offer reach
and capacity in various situations (from
dense urban to very low-density rural
areas) while reducing the Total Cost of
Ownership (TCO) for operators. Addition-
ally, network convergence through intro-
duction of IP packet technology in the
core, and eventually access, portion of
networks will open the way for fixed-
mobile convergence and IP telephony.
Financial innovation will allow operators to
deploy more aggressively into rural SSA.
This report highlighted several innova-
tions that allow operators to obtain suf-
ficient financing to cover the cost of infra-
structure deployment. For instance, a
pay-as-you-grow scheme allows an oper-
ator to pay for network capacity only as
demand warrants, and to avoid paying
for unused capacity. Under-Serviced
Area Licenses (USAL) and Output-Based
Aid (OBA) schemes can also sustain
such inroads by operators into rural
areas.
In addition to USALs and OBA, policy-
makers and regulators can do much to
facilitate further infrastructure rollout
among the rural poor. Below are some
issues for policy-makers to consider:
Encourage market entry by a full range of oper-
ators, including large-scale and micro-entrepre-
neurs.
Spectrum licensing and the reselling of
unused spectrum can promote the effi-
cient use of existing infrastructure and
should stimulate competition among
operators, by granting micro-entrepre-
neurs access to networks without the
need for infrastructure investment.
Impediments such as prohibitions on for-
eign ownership should be removed, to
encourage investment in infrastructure
as well as in service providers.
Promoting Private Sector Investment and Innovation 71

Encourage public-private partnerships to create
an enabling environment.
These efforts should include training for
end users in the use of ICT-enabled
services, and the marketing of value-
added services on existing networks. For
example, REOnet is providing training to
individuals in the use of ICTs for telemed-
icine, as well as programming in a
Linux environment. Additional funding
for training would stimulate demand for
services similar to Project IKON. Access
to financing for service providers is also
a critical issue that has to be addressed
by policy makers. Private sector invest-
ment has an important role to play in ICT
development, and all sources of funding
must be considered, including those
offered by public-private partnerships, in
order to lower the cost of small business
loans for ICT-related services, and
increase access to private equity.
Ensure technology- and service-neutrality of
regulatory policies.
The dizzying pace of change in informa-
tion and communication technologies
virtually ensures that regulations that are
technology- or service-specific will
72 Promoting Private Sector Investment and Innovation
Going Forward
become out of date very quickly. Techno-
logical evolution in the telecom sector will
continue to bring further opportunities for
developing countries. Regulatory frame-
work flexibility should allow a wide dif-
fusion of these emerging technologies.
Above all, ensure that the regulatory environ-
ment is transparent, pro-market, and fair.
Regulators should simplify existing
licensing procedures to ease market
entry and operations. By combining reg-
ulatory authority for telephony and IP
networks, developing countries can fos-
ter innovative service offerings at com-
petitive prices.
Africa’s next ICT consumers will demand
services that enrich lives and increase
access to information in ways that only
they can anticipate. By easing regulato-
ry friction, regulators can hasten the day
when even the rural poor in sub-Saha-
ran Africa have access to information
and communication technologies, and
can contribute to solutions to the vexing
issues outlined by the Millennium Devel-
opment Goals. Children in Senegal and
tuberculosis patients in South Africa
are ready.
Appendix A: Glossary of Terms
Access Part of a telecommunication network close
to the subscribers. It is the link between
the subscriber’s terminal and the local,
national and international core networks.
Access The access network is that portion of a
network public network that connects access nodes
to individual subscribers.
ADSL ADSL (Asymmetric Digital Subscriber Line)
transforms an operator’s existing copper
twisted pair investment into a multimedia
broadband distribution system. Working on
an existing copper telephone line, ADSL’s
transmission speed is up to 200 times
faster than today’s analog modems. ADSL’s
speeds range up to 12 megabits per sec-
ond. ADSL supports high-speed data com-
munications on top of traditional telephone
service, on a single telephone access line.
Allocation Allocation, planned by an international or
(of a frequency
national authority, of a frequency band to
band)
one or more radiocommunication services
or to radio astronomy, under specified con-
ditions. A formal definition is given in the
ITU Radio Regulations.
ARPU The Average Revenue Per User (ARPU)
measures the average amount of money
spent by a customer per month for a given
service such as a cellular phone, pager, etc.
Backbone A larger transmission line that carries data
gathered from smaller lines that intercon-
nect with it. At the local level, a back-
bone is a line or set of lines that local
area networks connect to for a wide area
network connection or within a local area
network to span distances efficiently (for
example, between buildings). On the
Internet or other wide area network, a
backbone is a set of paths that local or
regional networks connect to for long-dis-
tance interconnection. The connection
points are known as network nodes or
telecommunication data switching
exchanges (DSEs).
Backbone A network that uses high-speed transmis-
network sion paths and provides connectivity for
regional networks and other subnetworks.
The two English terms “backbone net-
work” and “core network” are often used
as synonyms. They both refer to the actu-
al heart (or core) of the telecom network.
This network should be able to transmit
and handle a huge amount of informa-
tion. Normally when using the term “core
network”, the operators refer to both
routing and transmission. The term “back-
bone network” refers only to the transmis-
sion resources needed to support the net-
work. In order to offer efficient communi-
cations, operators need a huge transmis-
sion capacity at the core of the network.
Backbone networks are used to intercon-
nect cities, regions, countries or even con-
tinents. The Internet was initially based on
the interconnection established in the late
sixties between universities and research
centers within the United States. Lack of
appropriate interconnection is, at the same
level as lack of universal access, at the
root of the Digital Divide. Some African
countries have an interconnection capacity
to the Internet that is equivalent to that
available to an individual broadband user
in a developed country.
Backhaul (1) In wireless network technology, to
transmit voice and data traffic from a cell
site to a switch, i.e., from a remote site to
a central site.
(2) In satellite technology, to transmit data
to a point from which it can be uplinked
to a satellite.
(3) To transmit data to a network back-
bone.
Bandwidth The maximum amount of data, measured
in ‘bits per second’ or bit/s, that can travel
a communications path in a given time,
Core network A network that uses high-speed transmis-
usually measured in seconds. Usually
noted with a K for 1000 bit/s,
M for 1 million and G for 1 billion bit/s.
Broadcasting A form of unidirectional telecommunication
intended for a large number of unidenti-
fied users having appropriate receiving
facilities, and carried out by means of
radio or by cable networks. In English, it
should be assumed that “broadcasting by
radio waves” is intended where the word
“broadcasting” is used without qualifica-
tion. Examples include sound or television
broadcasting, time signals, weather reports
to ships, teletext, and news agency bul-
letins.
BSC Base Station Controller. The part of the
wireless system’s infrastructure that con-
trols one or multiple cell sites’ radio sig-
nals, thus reducing the load on the
switch. Performs radio signal manage-
ment functions for base transceiver sta-
tions, managing functions such as fre-
quency assignment and handoff.
BSS Base Station Subsystem. The system of
base station equipment, including Base
Transceiver Stations (BTS) and Base
Station Controllers (BSC), which is
viewed by the Mobile Switching Centre
through a standardized interface, as
defined in the GSM series of
Recommendations, as being the entity
responsible for communicating with
mobile stations in a certain area.
BTS Base Transceiver Station. The name for the
antenna and radio equipment necessary to
provide wireless service in an area. Also
called a base station or cell site.
e-Commerce e-Commerce, electronic commerce, refers
Cable Telecommunication over a network of
distribution metal or optical cables for distributing
sound and video programs, and possibly
other signals, to a number of users who
are usually identified.. Some users may
have access to return channels.
CAPEX Capital Expenditure. Capital expenditures
are expenditures used by a company to
acquire or upgrade physical assets such as
equipment, property, or industrial build-
ings. In accounting, a capital expenditure
is added to an asset account (i.e. capital-
ized), thus increasing the asset base.
CDMA Code-Division Multiple Access, a digital
cellular technology that uses spread-
spectrum techniques. Unlike competing
systems, such as GSM, that use TDMA,
CDMA does not assign a specific fre-
quency to each user. Instead, every
channel uses the full available spectrum.
Individual conversations are encoded
with a pseudo-random digital sequence.
Cell An area of radio coverage, locally defined
as seen by a mobile station with a base
station identity code, and uniquely defined
as seen by the network with a cell global
identification (GSM/GPRS or with a cell
identification (UMTS).
CPE Customer Premises Equipment, a generic
term used to describe all customer
devices, including modems, Integrated
Access Devices (IAD), Residential Gateways
(RGW), and terminals.
sion paths and provides connectivity for
regional networks and other subnetworks.
The two terms “backbone network” and
“core network” are often used as syn-
onyms. They both refer to the actual heart
of the telecom network. This network
should be able to transmit and handle a
huge amount of information. Normally
when using the term “core network”, the
operators refer to both routing and trans-
mission. The term “backbone network”
refers only to the transmission resources
needed to support the network. In order to
offer efficient communications, operators
need a huge transmission capacity at the
core of the network.
Dial-up Access to the Internet via a modem or an
(access) ISDN connection, allowing bit rates up to
64 Kbit/s on a single twisted pair.
DSL Digital Subscriber Line (DSL) technology
works on the existing copper telephone
line already in a home, also known as a
“twisted pair”. It uses sophisticated digital
coding to utilize more of the existing space
on the wire, without interfering with the
normal phone conversations. It is extreme-
ly fast. With Asymmetric Digital Subscriber
Line (ADSL) download speed at up to 8
Mbit/s, it is 200 times faster than tradi-
tional analog modems. DSL technology
comes in different flavors, with ADSL and
Very high speed Digital Subscriber Line
(VDSL) the best known.
DVB-RCS Digital Video Broadcast Return Channel by
Satellite. International standard for two-
way broadband IP communication by satel-
lite.
to the online buying and selling of prod-
ucts and services. e-Commerce also
includes the selling and buying of products
and services offline. e-Commerce is a com-
ponent of e-Business.
It is defined as transactions that take place
on-line where the buyer and seller are
remote from each other.
EDGE Enhanced Data rates for GSM Evolution.
Enhancement to the GSM and the US
TDMA wireless communication standards
that increases data rates up to 473 Kbit/s.
EDGE is a full part of the family of third
generation (3G) standards that will enable
voice, video and multimedia transmissions.
The first generation of mobile communica-
tions systems was analog. First used for
voice, it was launched in the late 1970s
and early 1980s. Introduced in the 1990s,
second-generation (2G) systems use digital
encoding and include GSM, US TDMA and
CDMA. These second-generation systems
Promoting Private Sector Investment and Innovation 73

have been used mostly for voice. Between
now and the arrival of 3G, a variety of
techniques are being employed to improve
the speed of data for mobile Internet
access. These technologies include packet
enhancements for GPRS and improved data
rates for GSM and TDMA (EDGE).
Fixed/Mobile Fixed/Mobile Convergence (FMC) is a sub-
Convergence ject that covers two main aspects: infra-
structure and services. The infrastructure
portion refers to the capability of different
network elements: switches, Intelligent
Network (IN), or Next-Generation Network
(NGN), and Telecommunication
Management Network (TMN) or Customer
Care and Billing System (CC&BS) to support
fixed or mobile applications. The services
portion refers to the different Fixed/Mobile
Convergence services that can be offered
to end users.
Frequency A continuous set of frequencies lying
band between two specified limiting frequen-
cies. A frequency band is characterized by
two values that define its position in the
frequency spectrum, for instance its lower
and upper limiting frequencies.
Frequency The range of frequencies of electromagnet-
spectrum ic oscillations or waves that can be used
for the transmission of information.
GPRS General Packet Radio Service. A packet-
based wireless communication service that
promises data rates up to 114 Kbit/s and
continuous connection to the Internet for
mobile phone and computer users. GPRS is
based on GSM and will complement exist-
ing services such as circuit-switched cellu-
lar phone connections and the Short
Message Service (SMS).
GSM Global System for Mobile communications.
A study group created in 1982 by the
European Conference of Postal and
Telecommunications Administrations under
the French name “Groupe Spécial Mobile”
for defining pan-European digital cellular
mobile radio service. The GSM study group
was incorporated into ETSI on its creation in
1988, and its main function is to produce
detailed specifications. The present English
name was coined in 1991 to fit the
acronym GSM. GSM is the world’s most
widely used digital mobile telephony sys-
tem.
IP (Internet The Internet Protocol is part of the TCP/IP
Protocol) family of protocols. IP governs the format-
ting of variable-length packets (datagrams)
as well as their addressing scheme. It pro-
vides a connectionless service. IP has
become the universal network layer proto-
col upon which most of the upper layer
transport and application infrastructures
and services are built. IPv4 is its widely
used version. IPv6 is its new version that
is slowly being introduced.
ISP An Internet Service Provider (ISP) is a com-
pany or organization that provides Internet
access to the public or to other organiza-
tions, usually for a fee. Most offer a full
set of Internet services (access to e-mail,
newsgroups, File Transfer Protocol (FTP),
and Telnet, at a minimum) for either an
hourly rate or for a flat fee for a fixed
number of hours of access.
74 Promoting Private Sector Investment and Innovation
IXP Internet Exchange Point. An Internet
Exchange Point is a physical infrastructure
that allows different Internet Service
Providers (ISPs) to exchange Internet traffic
between their autonomous systems by
means of mutual peering agreements. IXPs
are typically used by ISPs to reduce
dependency on their respective upstream
providers; furthermore, they are used to
increase efficiency and fault-tolerance.
LAN A Local Area Network (LAN) is a group of
computers and associated devices that
share a common communications line and
typically share the resources of a single
processor or server within a small geo-
graphic area (for example, within an office
building or a group of buildings). Usually,
the server has applications and data stor-
age that are shared in common by multi-
ple computer users.
Local loop Local loop refers to the access link
between the subscriber and the access
provider network.
MMS A service - standardized by the 3rd
Generation Partnership Project (3GPP) - for
sending multimedia messages including a
combination of text, audio, graphics,
image, animation, and video.
MSC Mobile-service Switching Centre. The MSC
is an exchange that performs the functions
of switching, routing and control of the
call, as well as charging and accounting,
and controls interworking with fixed net-
works. It is in charge of managing the cir-
cuit switching communication between
mobile handsets, the transmission of Short
Messages, and handover (when needed).
MVNO Mobile Virtual Network Operator. A Mobile
Virtual Network Operator is a mobile oper-
ator that does not own its own spectrum
and usually does not have its own net-
work infrastructure. Instead, MVNOs have
business arrangements with traditional
mobile operators to buy minutes of use
(MOU) for sale to their own customers.
NGN Next-Generation Network. Behind the
Next-Generation Network term, there are
two concepts: the first relating to multime-
dia service evolution for public networks,
the second to the separation of control
plane signalization and transport plane sig-
nalization. Next-generation networks are
designed to provide the advanced services
that are needed by the convergence of
voice, video and data applications over a
single unifying network model.
Node In networks, a processing location. A node
can be a computer or some other device,
such as a printer. Every node has a unique
network address, sometimes called a Data
Link Control (DLC) address or Media Access
Control (MAC) address.
OPEX Operating expenses before depreciation
and amortization of tangible and intangible
assets and before amortization of actuarial
adjustments in the early retirement plan.
Optical fiber A filament-shaped waveguide made of dielec-
tric materials intended to guide electromag-
netic energy in the form of optical waves. It is
generally made of a core surrounded by a
cladding, then surrounded by a coating.
Appendix A
Peering Peering is the arrangement of traffic
exchange between Internet service
providers (ISPs). Larger ISPs with their own
backbone networks agree to allow traffic
from other large ISPs in exchange for traf-
fic on their backbones. They also exchange
traffic with smaller ISPs so that they can
reach regional end points. Essentially, this
is how a number of individual network
owners put the Internet together.
POP Point of Presence. The node at which an
Internet Service Provider connects a sub-
scriber to the Internet.
SMS Short Message Service. A service for send-
ing text messages of up to 160 characters
to mobile phones that use Global System
for Mobile (GSM) communication.
Submarine A coaxial or optical cable designed for
cable wideband or high digital rate transmission
under the sea. This definition is restrictive
in that it describes a modern cable which,
although it is also used for telegraph and
data transmission, is sometimes called a
“submarine telephone cable” to distin-
guish it from the older “submarine tele-
graph cable”.
TDMA Time Division Multiple Access, a technolo-
gy for delivering digital wireless service
using time-division multiplexing (TDM).
TDMA works by dividing a radio frequency
into time slots and then allocating slots to
multiple calls. In this way, a single fre-
quency can support multiple, simultaneous
data channels. TDMA is used by the GSM
digital cellular system. TDMA is a compet-
ing technology to CDMA.
Total Cost The combined indirect and direct costs of
of Ownership owning a piece of hardware or software.
TRX Transceiver (in GSM). A network compo-
nent that can serve full duplex communi-
cation on eight full-rate traffic channels.
UMTS Universal Mobile Telecommunications
System. Technology for 3G mobile services
(next generation of GSM (Global System of
Mobile communications)). In addition to
voice and video telephony services, UMTS
supports data transfer rates up to 144
Kbit/s in rural environment and 2 Mbit/s
in indoor environment.
It is also the European implementation of
the ITU-R-defined family of IMT2000 stan-
dards based on Wideband Code Division
Multiple Access (WCDMA) technology.
VAS Value-Added Service. A service provided by
a telecommunication network encompass-
ing data processing at higher layers of the
OSI reference model.
VoIP VoIP (voice over IP - that is, voice deliv-
ered using the Internet Protocol) is used in
IP telephony for a set of facilities for man-
aging the delivery of voice information
using the Internet Protocol (IP). It means
sending voice information in a packet
mode rather than in the circuit mode used
by the Public Switched Telephone Network
(PSTN).
VSAT Very Small Aperture Terminal. An earth-
bound station used in satellite communica-
tion of data, voice and video signals,
excluding broadcast television. A VSAT con-
 sists of two parts, a transceiver that is placed outdoors
in direct line of sight to the satellite, and a device that
is placed indoors to interface the transceiver with the
end user’s communications device, such as a PC. The
transceiver receives or sends a signal to a satellite
transponder in the sky. The satellite sends and
receives signals from a ground station computer that
acts as a hub for the system.
WAP Wireless Application Protocol is the current de facto
standard for providing Internet communications on dig-
ital mobile phones, personal digital assistants and
other wireless terminals.
WiFi Wireless Fidelity. WiFi has been adopted as a common
Wireless IP WIP solutions carry packetized data over a high-speed
name for Wireless Local Area Network (WLAN) tech-
nology based on the IEEE 802.11 standard. At the
same time, WiFi is an initiative from the industry to
define a set of interoperability tests for WLAN products
based on the IEEE 802.11 family of standards, and to
provide such products with a WiFi marking logo and
certificate of interoperability.
WiMAX Worldwide Interoperability for Microwave Access.
WiMAX is a wireless industry coalition whose mem-
bers organized to promote IEEE 802.16 standards for
Broadband Wireless Access (BWA) networks. WiMAX
802.16 technology is expected to enable multimedia
applications with wireless connection, and enable net-
works to have a wireless last-mile solution. IEEE
802.16 covers the fixed and mobile wireless access
technologies (known as LMDS) with radio from 2 to
11 GHz. IEEE 802.16d covers the Fixed Wireless Access
technologies (known as WIP) with radio below 11
GHz. Frequency bands covered are: 2.4 & 5.8 GHz
(both unlicensed) and 2.5 (MMDS) & 3.5 GHz (both
licensed). IEEE 802.16e is supposed to add mobility to
802.16d. IEEE 802.16q adds network management
facilities for IEEE 802.16d/e.
solution radio link. It can be used as an access technology to
connect broadband users, or as a transmission technol-
ogy between remote network elements.
Wireless Way of provisioning local loops without wires. Local
Local Loop loops are the lines between a customer and a tele-
phone company. Such systems are being deployed in
Asia and other developing countries to avoid the costs
of wires and cables.
Source: Alcatel Terminology Glossary

Appendix B: Possible Impediments to Regulatory Effectiveness*

ISSUES IMPEDIMENTS

Relationship between policy maker and regulator
- Political interference in running of regulator
- Function ambiguity between regulator and policy maker
- Function ambiguity between regulator and competition authority
- Function ambiguity between regulator and Universal Service agency
- Lack of political commitment
- Interventions in regulatory decisions by policy maker overly-influenced by its relationship with operators

Accountability of regulator - Inadequate mechanisms for holding regulatory members accountable for their decisions

Autonomy of regulator - Over-reliance on government/external bodies for funding

- Political interference in remuneration, appointment and dismissal of regulator’s members
- Regulatory capture or excessive influence by a particular group

Participation in decision-making processes - Inadequate consultation mechanisms for involvement of external parties in processes
- Over-reliance on informal (non-orthodox) lobbying of regulator

Transparency of decision-making processes - Lack of explanations provided in public and to operators for decisions

Predictability of decision-making processes - Poor enforcement of license conditions and/or legislation

- Lack of consistency in decision-making

Effectiveness of regulatory policy tools in key areas - Policy tools do not achieve their objectives (e.g. ineffective price caps, universal service targets, licensing procedures,
ineffective dispute resolution procedures etc)

Regulator’s organizational structure and resource - Inappropriate organizational structure

requirements (human, financial) - Inadequate financial resources
- Inadequate regulatory/administrative/business management skills of key staff

* This table was taken from B. Guermazi and D. Satola, Creating the ‘Right’ Enabling Environment for ICT” in Robert Schware, ed. E-Development: From Excitement to Efficiency, The World
Bank, Global ICT Department, November, 2005

Promoting Private Sector Investment and Innovation 75

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Promoting Private Sector Investment and Innovation
To Address the Information and Communication Needs Of the Poor in Sub-Saharan Africa
Of the Poor in Sub-Saharan Africa
Promoting Private Sector
Investment and Innovation
To Address the Information and Communication Needs